Econometrica: Mar, 1979, Volume 47, Issue 2

Components of Variation in Panel Earnings Data: American Scientists 1960-70

https://doi.org/0012-9682(197903)47:2<437:COVIPE>2.0.CO;2-M
p. 437-454

Lee A. Lillard, Yoram Weiss

This paper is concerned with the sources of variation in the earnings of American scientists over the decade 1960-70. It focuses on sources of variation over time as well as at a point in time. Earnings variation over time is decomposed into sources due to measurable variables representing an earnings function, a random effect individual variance component in the level of earnings, a random effect individual component in earnings growth, and a serially correlated transitory component. Maximum likelihood estimates of the implied parameters are presented and a method for obtaining GLS estimates of the earnings regression function, when the residual variance components are given, is explored.