EARNINGS DISTRIBUTION AND INEQUALITY OVER TIME - EDUCATION VERSUS RELATIVE POSITION AND COHORT

This paper constructs a theoretical model for analyzing the earnings distribution over time and provides an estimation procedure for the inequality of earnings over time. The theoretical model incorporates Gibrat's so-called "law of proportionate effect', Galton's "regression towards the mean' and serial correlation of the error terms, under the condition that the density function of earnings for each age-cohort in Japan is distributed as log-logistic. An emphasis is placed upon comparison of the influence of the relative position in the distribution with the influence of education on earnings. Finally, the coefficients of variation over time are presented. -Authors