Donggyun Shin

Trends in Men's Earnings Volatility: What Does the Panel Study of Income Dynamics Show?

Using Panel Study of Income Dynamics data for 1969 through 2004, we examine movements in mens earnings volatility. Like many previous studies, we find that earnings volatility is substantially countercyclical. As for secular trends, we find that mens earnings volatility increased during the 1970s, but did not show a clear trend afterwards until a new upward trend appeared in the last few years. These patterns are broadly consistent with the findings of recent studies based on other data sets.

ARE INITIAL WAGE LOSSES OF INTERSECTORAL MOVERS COMPENSATED FOR BY THEIR SUBSEQUENT WAGE GAINS

This paper presents an equilibrium explanation of the inter- and intrasectoral mobility of workers. Analyses of our samples from the Panel Study of Income Dynamics and the National Longitudinal Survey of Youth show that, other things being equal, the initial wage decline is greater for intersectoral movers than for intrasectoral movers. Intersectoral movers, however, enjoy higher wage growth in subsequent years on postunemployment jobs than intrasectoral movers do, and hence are compensated for their initial wage decline. Our estimates suggest that, other things being constant, the additional short-term wage loss associated with sector shifts is overturned in no more than four years by the greater wage growth of intersectoral movers in subsequent years. The findings in the current study clearly show that the true economic costs of intersector mobility tend to be overstated in existing studies and are significantly lowered in the long-term perspective. Calibration of a simple lifetime utility model demonstrates that inter- and intrasectoral movements of workers are quantitatively consistent with an equilibrium framework, at least for a major group of workers who move with longer term perspectives. Evidence also shows that job seekers consider not only the initial wage rate but also the subsequent wages received from the postunemployment job when deciding whether to recommence employment or switch sectors.

Income Polarization and Crime: A Generalized Index and Evidence from Panel Data

The empirical evidence for a positive relationship between income inequality and crime is mixed at best. This paper questions the use of standard income inequality measures (e.g., Gini coefficient) in this literature and makes the case that polarization of the income distribution is a crucial aspect in understanding the incentives for criminal activities. Two hypotheses are presented: (i) for a given level of inequality, polarization reduces between-group income mobility and thus raises crime incentives; (ii) for a given level of between-group income mobility, the poor feel more alienated against the rich than the latter against the former. We test these hypotheses using a new measure of social antagonism based on income bipolarization that allows for asymmetric feelings of alienation between low- and high-income groups. The asymptotic distribution of the proposed bipolarization index is derived and an easy-to-implement jackknife variance estimation algorithm is developed. Fixed effects estimates suggest that when both the Gini and the bipolarization indices are included in the same regression model, bipolarization significantly raises the crime rate, whereas the Gini index does not. It is also found that the proposed generalized bipolarization index has more explanatory power when more weight is placed on the feeling of alienation of the lower income class.

Measuring Social Tension from Income Class Segregation

We develop an index that effectively measures the level of social tension generated by income class segregation. We adopt the basic concepts of between-group difference (or alienation) and within-group similarity (or identification) from the income [bi]polarization literature; but we allow for asymmetric degrees of between-group antagonism in the alienation function, and construct a more effective identification function using both the relative degree of within-group clustering and the group size. To facilitate statistical inference, we derive the asymptotic distribution of the proposed measure using results from U-statistics. As the new measure is general enough to include existing income polarization indices as well as the Gini index as special cases, the asymptotic result can be readily applied to these popular indices. Evidence from the Panel Study of Income Dynamics data suggests that, while the level of social tension shows an upward trend over the sample period of 1981 to 2005, government’s taxes and transfers have been effective in reducing the level of social tension significantly.