A Longitudinal Analysis of Within-Education-Group Earnings Inequality

Using a large Swedish longitudinal database for the period 1982–2005, I estimate and compare within-group inequality in persistent and transitory earnings among men with highschool and college degrees. Analyses of inequality over the life cycle reveal that experiencevariance profiles of persistent earnings are very similar across the two education groups and also consistent with standard human capital models of on-the-job training. Transitory earnings shocks display a marked U-shaped variance pattern over the life-cycle for both groups, but are clearly larger for high-school graduates and also account for a larger proportion of their overall variance. Analyses of changes in within-group inequality over time, holding life-cycle effects constant, show that high-school and college graduates have been subject to similar trend growths in both persistent and transitory earnings differentials between 1982 and 2005