This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 97 No. 3 (June 2007)
AER Volume. 97, Issue 3 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Download Data Set (109.71 KB)
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
Learning Your Earning: Are Labor Income Shocks Really Very Persistent?
Article Citation
Guvenen, Fatih. 2007. "Learning Your Earning: Are Labor Income Shocks Really Very Persistent?."
American Economic Review,
97(3): 687-712.
DOI: 10.1257/aer.97.3.687
DOI: 10.1257/aer.97.3.687
Abstract
The current literature offers two views on the nature of the labor income process.
According to the first view, individuals are subject to very persistent income shocks
while facing similar life-cycle income profiles (the RIP process, Thomas MaCurdy
1982). According to the alternative, individuals are subject to shocks with modest
persistence while facing individual-specific profiles (the HIP process, Lee A. Lillard
and Yoram A. Weiss 1979). In this paper we study the restrictions imposed by these
two processes on consumption data—in the context of a life-cycle model—to
distinguish between the two views. We find that the life-cycle model with a HIP
process, which has not been studied in the previous literature, is consistent with
several features of consumption data, whereas the model with a RIP process is
consistent with some, but not with others. We conclude that the HIP model could be
a credible contender to—and along some dimensions, a more coherent alternative
than—the RIP model. (JEL D83, D91, E21, J31)
Article Full-Text Access
Full-text Article
Additional Materials
Download Data Set (109.71 KB)
Authors
Guvenen, Fatih
