Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway

Abstract

As part of a cross-country research consortium, in the first part we use administrative data from Norway between 1993 and 2017 to present stylized facts about individual earnings dynamics. Some of our key findings are as follows. (i) Norway has not been immune to the recent increase in top income inequality observed in other countries. (ii) Earnings dispersion below the 90th percentile declines sharply over the life cycle but increases significantly for those in the top 10%. (iii) The earnings growth distribution is left-skewed and leptokurtic, the extent of which varies with age and past earnings. (iv) Finally, earnings in the top 1% are highly persistent even relative to those in the top 2% or 5%. Abstract In the second part, we exploit a longer panel dating back to 1967 to investigate the intergenerational transmission of income dynamics. First, we find that children of high-income and high-wealth fathers enjoy steeper income growth over the life cycle and face more volatile but more positively skewed income changes, suggesting that they are more likely to pursue high-return and high-risk careers. Second, the income dynamics of fathers and children are strongly correlated. In particular, the children of fathers with steeper life-cycle income growth, more volatile incomes, or higher downside risk also have income streams of similar properties. These findings shed light on the determinants of intergenerational mobility.