Household Lifetime Inequality Estimates in the U.S. Labor Market

Household Lifetime Inequality Estimates in the U.S. Labor Market

Published: Mar 31, 2016
Publisher: Research in Labor Economics, Inequality: Causes and Consequences, vol. 43 (subscription required)

Luca Flabbi

Mauricio Salazar

This paper provides household lifetime inequality indexes derived from representative U.S. labor market data. We obtain this result by using estimates of the household search model proposed by Flabbi and Mabli (2012). Inequality indexes computed on the benchmark model shows that inequality in utility values is substantially different from inequality in earnings and wages and that inequality at the cross-sectional level is significantly different from inequality at the lifetime level. Both results deliver original policy implications that would have not been captured without using our approach. In particular, we find that a counterfactual policy experiment consisting in a mean-preserving spread of the wage offers distributions increases lifetime inequality in wages and earnings but not in utility. When comparing inequality at the individual level between men and women, we find inequality in wages and earnings to be higher for husbands than wives but inequality in utility to be higher for wives. A counterfactual decomposition shows that the job offers parameters are the main source of the gender differential.

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