Earnings Dispersion Research Articles

Unions, technology and social class inequalities in the US, 1984–2019

Earnings inequality in the US has risen in recent decades, with social class inequalities being a central component of this trend. While technological change and de-unionisation are considered key contributors to increased earnings dispersion, their specific influence on inequalities between employees’ social classes has received limited attention. This study theoretically and empirically investigates the relationship between technological change, de-unionisation and the earnings trajectories of occupational classes from 1984 to 2019. The empirical analysis uses industry-level time-series cross-section data and industry-level measures of union density, computer investments and class earnings. Descriptive analyses show earnings growth for non-manual classes and stagnant or declining earnings for manual ones. Results provide limited evidence that computerisation affected classes differently in the industries where introduced. In contrast, industry-level de-unionisation reinforced class inequalities in two ways. First, unionisation exhibited a stronger association with lower-class earnings. Second, manual workers were more prevalent in industries that experienced substantial declines in union density.

Early Career Paths of Economists Inside and Outside of Academia

Economics job candidates face considerable professional and financial uncertainties when deciding between academic and nonacademic career paths. Using novel panel data, we provide a broad picture of PhD economists’ early career mobility and earnings growth–both in and outside of academia. We find that academic jobs have fallen to just over half of US placements, with growing shares in tech, consulting, and government. We document considerable early career job mobility and higher earnings growth among job changers, private-sector economists, and men. We also find an earnings premium for graduates of top-ranked PhD programs that grows over early career years in academia while shrinking in the private sector. These different earnings dynamics mean the opportunity cost (in terms of potential earnings) of remaining in academia is generally less for graduates of top-ranked programs, although there is significant dispersion in mid-career earnings among these academics.

The impact of COVID-19 on stock market liquidity: Fresh evidence on listed Chinese firms

This paper examines the impact of the COVID-19 pandemic on the liquidity of Chinese stock market, while accounting for heterogeneity and transmission channels. The analysis incorporates important innovations relative to previous literature. It incorporates both global and national COVID-19 proxies to measure the severity of the pandemic, providing fresh insights into its disruptive effect on the Chinese stock market. While all businesses are expected to experience significant economic losses due to the pandemic, it is important to recognise the effects can vary across firms. Our study as indicates that COVID-19 shocks can have a negative impact on liquidity by influencing three critical factors: earnings dispersion, equity risk premia, and trade credit restrictions. These findings hold substantial importance for both governments and regulators, who should take actions to stimulate stock market liquidity and provide support to affected firms.

A Study on Risk and Return Analysis of Selected Private Sector Banks in India

The study examines determinants of risk and growth for five commercial banks in the period 2018-2022. A bank's growth depends on its profitability and other variables of size, asset type, financial structure, earnings dispersion and other independent variables. This paper presents a portion that quantifies how internal determinants and external factors contribute to the performance of selected private Indian banks. Finally, size and asset structure are two variables that show significant correlations with bank profitability.

Cross-sectional dispersion and bank performance

We examine the relation between cross-sectional earnings dispersion and the banking sector's performance. Theory suggests that cross-sectional earnings dispersion will lead to greater loan losses and higher interest rates. We confirm this hypothesis by showing a robust association between earnings dispersion and bank performance. Dispersion in earnings explains more of the overall bank performance than macroeconomic indicators for business cycles. We also find that banks tighten their lending standards and increase interest rates to partially compensate for future loan losses. Finally, we find that cross-sectional earnings dispersion is associated with dispersion in bank performance. The relation between dispersion in bank performance and earnings dispersion is declining over time suggesting that systematic risk is rising in the banking sector.

Understanding Twenty Years of Inequality and Poverty Trends in Russia

The distribution of income in Russia changed significantly over the past 25 years. This paper examines the factors that have been driving the fall in inequality and poverty over two recent decades in the Russian Federation. Changes in earnings from public and private sectors and pensions have been the main sources of changes in the income distribution between 1994 and 2015. Falling inequality and poverty were the result of a decrease in the dispersion of private sector earnings and an increase in the levels of pensions and public sector earnings. Neither the evolution of socio‐demographic characteristics nor the level or structure of employment alone had big impacts.

The evolution of the earnings distribution in a volatile economy: Evidence from Argentina

This paper studies earnings inequality and dynamics in Argentina between 1996 and 2015. Following the 2001–2002 crisis, the Argentine economy transitioned from a low‐ to a high‐inflation regime, while collective bargaining and the minimum wage gained influence. This transition was associated with a persistent decrease in earnings dispersion and cyclical movements in higher‐order moments of the distribution of earnings changes. To shed light on the changing nature of wage rigidity during this period, we develop a new method to estimate regular‐wage processes. As the Argentine economy transitioned from low to high inflation, the monthly frequency of regular‐wage changes almost doubled, while the distribution of regular‐wage changes morphed from having a mode around zero and positive skewness to having a positive mode and more symmetric tails.

Permanent‐income inequality

Through certainty equivalent consumption (CE) measures, we show that dispersion of current earnings, expenditures, and net worth overstate welfare inequality. This is largely due to the unaccounted value of future earnings, which we call human wealth. The latter mitigates permanent‐income inequality, though its influence is diminished by the growing importance of assets in lifetime wealth. Average expenditures and CE inequality roughly doubled between 1983 and 2016 and, to weigh these offsetting forces, we decompose aggregate welfare changes into contributions from the level and dispersion of consumption, as well as uncertainty and demographic composition. Rising inequality has offset about 1/4 of the welfare gains from higher consumption, with most of the losses accruing after 2000.

Inequality and earnings dynamics in France: National policies and local consequences

This paper provides new stylized facts about labor earnings inequality and dynamics in France for the period 1991–2016. Using linked employer–employee data, we show that (i) labor inequality in France is low compared to other developed countries and has been decreasing until the financial crisis of 2009 and increasing since then, (ii) women experienced high earnings growth, in particular at the bottom of the distribution, in contrast to the stability observed for men. Both result from a decrease in labor costs at the minimum wage and an increase in the hourly minimum in the aftermath of the 35h workweek policy, (iii) top earnings (top 5 and 1%) grew moderately while very top earnings (top 0.1 and 0.01%) experienced a much higher growth, (iv) inequality between and within cohorts follow the same U‐shaped pattern as global inequality: it decreased before 2009 and then increased until 2016, (v) Individual earnings mobility is stable between 1991 and 2016, and very low at the top of the distribution, (vi) the distribution of earnings growth is negatively skewed, leptokurtic, and varies with age. Then, studying earnings dispersion both within and between territories, we document strong differences across cities as well as between urban and rural areas, even after controlling for observable characteristics. We also observe a continuous decrease in earnings inequality between territories. However, a larger inflation in rural territories mitigates this convergence. Finally, we document a strong reduction in inequality within rural and remote territories, again driven by changes at the bottom of the wage distribution.

Practical Applications of Sales Dispersion: A Robust Factor to Consider to Achieve Alpha

In <b><i>Sales Dispersion: A Robust Factor to Consider to Achieve Alpha</i></b>, from the Spring 2021 issue of <b><i>The Journal of Wealth Management</i></b>, authors <b>Andrew Cohen</b> (of <b>Old Dominion University</b>) and <b>Feng Dong</b> (of <b>Siena College</b>) examine the benefits of using sales forecast dispersion for predicting future stock performance. They hypothesize that companies with lower sales dispersion use strategies to optimize production, inventory control, and distribution channels, which eventually leads to long-term profitability. The authors find that the lower the analyst sales dispersion, the bigger the forecasting edge and the higher the probability of generating significant alpha. They conclude that sales dispersion is significantly more robust in predicting future stock performance than earnings dispersion. <b>TOPICS:</b>Performance measurement, analysis of individual factors/risk premia, wealth management

Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway

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.

The Evolution of the Earnings Distribution in a Volatile Economy: Evidence from Argentina

This paper studies earnings inequality and dynamics in Argentina between 1996 and 2015. Following the 2001--2002 crisis, the Argentine economy transitioned from a low- to a high-inflation regime. At the same time, the number of collective bargaining agreements increased and the minimum wage adjustments became more frequent. We document that this macroeconomic transition was associated with a persistent decrease in the dispersion of real earnings and cyclical movements in higher-order moments of the distribution of earnings innovations. To understand this transition at the micro level, we estimate processes of regular wage adjustments within job spells. As the Argentine economy transitioned from low to high inflation, the monthly frequency of regular wage adjustments almost doubled, while the distribution of changes in regular wages morphed from having a mode close to zero and being positively skewed to having a positive mode and being more symmetric.

The impact of deunionization on the growth and dispersion of productivity and pay

Abstract This article presents an Agent-Based Model (ABM) that seeks to explain the concordance of sluggish growth of productivity and of real wages found in macroeconomic statistics, and the increased dispersion of firm productivity and worker earnings found in micro level statistics in advanced economies at the turn of the 21st century. It shows that a single market process unleashed by the decline of unionization can account for both the macro- and micro-economic phenomena, and that deunionization can be modeled as an endogenous outcome of competition between high wage firms seeking to raise productive capacity and low productivity firms seeking to cut wages. The model highlights the antipodal competitive dynamics between a “winner-takes-all economy” in which corporate strategies focused on cost reductions lead to divergence in productivity and wages and a “social market economy” in which competition rewards the accumulation of firm-level capabilities and worker skills with a more egalitarian wage structure.

Global Earnings Inequality, 1970–2018

Abstract We estimate trends in global earnings dispersion across occupational groups by constructing a new database that covers 68 developed and developing countries between 1970 and 2018. Our main finding is that global earnings inequality has fallen, primarily during the 2000s and 2010s, when the global Gini coefficient dropped by 15 points and the earnings share of the world's poorest half doubled. Decomposition analyses show earnings convergence between countries and within occupations, while within-country earnings inequality has increased. Moreover, the falling global inequality trend was driven mainly by real wage growth, rather than changes in hours worked, taxes or occupational employment.

Sales Dispersion: A Robust Factor to Consider to Achieve Alpha

How the divergence among investor opinions affects stock performance has been discussed in academia and industry for a long time without a clear conclusion. This research hypothesizes that companies with lower sales forecast dispersion can more accurately and efficiently plan strategies to optimize production, inventory control, and distribution channels, thereby minimizing waste and overall expenses. This, in turn, will increase long-term profitability. Using portfolio sorting analysis, this article documents that the lower the analyst sales dispersion, the bigger the company’s forecasting edge and the higher the probability of future stock outperformance per level of risk (alpha). Because sales is a more direct demand-driven evaluation measure than earnings and sales forecasts can be utilized to evaluate all companies, sales dispersion is more robust in predicting future stock performance than earnings dispersion. TOPICS:Performance measurement, analysis of individual factors/risk premia, wealth management Key Findings ▪ Revenue dispersion is a better factor than earnings dispersion to forecast future company and stock price performance. ▪ Revenue dispersion is robust enough to use as a factor to achieve alpha. ▪ Revenue dispersion is significantly more robust during periods of high market noise.

Trading Volume and Dispersion of Signals

I propose a new measure of investor disagreement based on thirty-nine factors from the return-predicting anomaly literature. Consistent with theoretical work on volume, I show that a one standard deviation change in anomaly-based disagreement is associated with a 16.7% higher turnover in the next period. The positive and significant relationship is robust to different specifications, alternative measures of turnover and disagreement, and different periods. I document that a firm's information environment moderates the effect of disagreement on volume. Disagreement effects are stronger for firms with less public information and more complex information releases. Anomaly-based disagreement also explains analyst behavior - it is positively related to their forecast dispersion and absolute forecast errors in earnings and target prices.

Education and wage inequality before and during the fiscal crisis: A quantile regression analysis for Greece 2006–2016

AbstractThe Greek labor market has undergone dramatic changes during the past 10 years. Wage inequality, especially at the bottom end of the earnings distribution, increased sharply. Simultaneously, and despite a massive emigration wave of mainly highly educated employees, the ratio of skilled to unskilled labor has further increased. In this paper, we analyze the relationship between education and the dispersion of male earnings, using Labor Force Survey data, for the years 2006 and 2016. We address both unobserved heterogeneity and potential endogeneity by using an instrumental variables estimator, designed for quantile regression modeling. Our best estimates suggest that the returns to education are higher at lower quantiles in the pre‐crisis period, while the opposite holds true in the post‐crisis period. It is shown that within‐group inequality, mainly among university graduates, has played a major role in these developments. Interestingly, our findings appear to be, in part, driven by changing returns to education across quantiles in the public sector. Increased demand for skilled workers, heterogeneous returns to education across different fields of study, and “ability” are proposed as potential underlying mechanisms.

Earnings Risks, Savings and Wealth Concentration

A criticism of earnings risk models of wealth inequality is that they do not accurately capture individual's earnings risks. I construct a stochastic process that directly determines workers earnings. I use a set of new empirical moments to match moments of earnings changes in the universe of workers in the U.S. economy. Despite its computational challenges, a stochastic process that determines earnings instead of labor productivity improves the modeling of risks as it allows me to (1) reproduce the distribution of earnings, (2) match several moments of the distribution of earnings changes, and (3) skill-dependence of earnings profiles. To study the implications of such data-guided earnings risks for wealth concentration, I develop a general equilibrium stochastic life cycle production economy with skilled and unskilled workers. I show that data-guided earnings risks, contrary to what Castaneda et al. (2003) implies, are not large enough to explain high saving rates of top earners. Therefore, wealth in the model is less concentrated than the data. I also study how changes in earnings affect the distribution of wealth over time. Consistent with the data, I allow for earnings profiles, skill premium, share of skilled workers in the population, and tax schedules to vary with time. My findings show that changes in Wealth inequality between 1989 and 2013 can almost entirely be attributed to changes in earnings dispersion. Although in both periods, wealth concentration is lower than the data, changes in the wealth share of top one percent over time matches the data.

Inclusive development. How is Poland doing in comparison to other OECD countries?

Inclusive development is a multifaceted conception, which makes it difficult to measure. Recent years, however, have brought some proposals for measuring this phenomenon, which opens up new opportunities to deepen the knowledge of how countries are doing in making their economic and social progress more inclusive. The aim of the paper is to examine the level of advancement of inclusive development in Poland in comparison to other OECD countries. The main hypothesis states that the development in Poland is less inclusive than the OECD average. The research covers data from 30 countries (OECD members, excluding the countries where such data were unavailable), and is based on the OECD’s proposal of measurement. The study was conducted with the use of data normalisation into unified indices, taxonomic methods (cluster analysis based on the Ward hierarchic method), and comparative analysis. The results indicate areas of improvement for Poland. These are issues connected with the functioning of the labour market (the level of labour productivity, employment ratio, earnings dispersion), access to loans for starting or expanding businesses, but also life expectancy, wealth distribution, early childhood education and care, and, most of all, characteristics related to the area of governance, such as trust in the government, and voter turnout.

A Quantitative Analysis of Life-Cycle Inequality Across U.S. and Europe

I document that (i) the mean and dispersion of pre-tax labor earnings grow faster over the life-cycle in the U.S. than in some European countries; (ii) these facts are largely driven by individuals with at least a college degree. I study these differences in labor earnings inequality using a life-cycle model of human capital accumulation and elastic labor supply which features non-linear taxation, in conjunction with a college choice and complementary investments during college. The model economy accounts for the differential mean earnings growth patterns of individuals with and without a college degree in the United States, as well as the observed within-group inequality over the life cycle. I find that non-linear taxation significantly suppresses pre-tax earnings, reduces college attendance, and investments during college. More generous subsidies and transfers for college exacerbate labor earning inequality. I find that differences in taxation and college subsidies alone account for 94% of the differences in mean earnings, and 80% of the differences in variance of log earnings over the life-cycle across the U.S. and European countries. To fully reconcile the model with data, the role of differences in initial conditions appear key.