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Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job-Ladder Risk versus Human Capital

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  • Serdar Ozkan
  • Jae Song
  • Fatih Karahan

Abstract

We study the determinants of lifetime earnings (LE) inequality in the United States by focusing on latent heterogeneity in job-ladder dynamics and on-the-job learning. We use administrative data to document a novel set of moments on job mobility and earnings growth across the LE distribution. We then estimate a structural model featuring a rich set of worker types and firm heterogeneity. We find vast ex ante differences in job-loss, job-finding, and contact rates across worker types. These differences account for 75% of the lifetime wage growth differential among the bottom half of the LE distribution. Above the median, almost all lifetime wage growth differences are a result of Pareto-distributed learning ability.

Suggested Citation

  • Serdar Ozkan & Jae Song & Fatih Karahan, 2023. "Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job-Ladder Risk versus Human Capital," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(3), pages 506-550.
    • Handle: RePEc:ucp:jpemac:doi:10.1086/725790
    DOI: 10.1086/725790
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    Cited by:

    1. Kaas, Leo & Lalé, Etienne & Siassi, Nawid, 2023. "Job Ladder and Wealth Dynamics in General Equilibrium," CEPR Discussion Papers 18706, C.E.P.R. Discussion Papers.
    2. Fatih Guvenen & Rocio Madera & Serdar Ozkan, 2024. "Consumption Dynamics and Welfare Under Non-Gaussian Earnings Risk," Working Papers 2024-007, Federal Reserve Bank of St. Louis, revised 27 Jul 2024.
    3. Kaas, Leo & Lalé, Etienne & Siassi, Nawid, 2023. "Job Ladder and Wealth Dynamics in General Equilibrium," EconStor Preprints 280694, ZBW - Leibniz Information Centre for Economics.

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