On the Covariance Structure of Earnings and Hours Changes

62 Pages Posted: 27 Feb 2001 Last revised: 19 May 2023

See all articles by John M. Abowd

John M. Abowd

Cornell University Department of Economics; Labor Dynamics Institute; Cornell University - School of Industrial and Labor Relations; National Bureau of Economic Research (NBER); CREST; IZA Institute of Labor Economics

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: February 1986

Abstract

This paper presents an empirical analysis of changes in individual earnings and hours over time. Using longitudinal data from three panel surveys,we catalogue the main features of the covariance structure of changes in earnings and hours. We then present an interpretation of these features in terms of both a life-cycle labor supply model and a fixed-wage labor contract model. Our major findings are:(1) there is a remarkable similarity in the covariance structure of earnings and hours changes across the three surveys; and (2) apart from simple measurement error, the major component of variance in earnings and hours affects earnings and hours equi-proportionately.

Suggested Citation

Abowd, John and Card, David E., On the Covariance Structure of Earnings and Hours Changes (February 1986). NBER Working Paper No. w1832, Available at SSRN: https://ssrn.com/abstract=237137

John Abowd (Contact Author)

Cornell University Department of Economics ( email )

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David E. Card

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Institute for the Study of Labor (IZA)

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Germany

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