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Finance and Economics Discussion Series: 2009-08 Screen Reader version ^♣

Modeling Earnings Dynamics

Joseph G. Altonji, Anthony A. Smith, and Ivan Vidangos

Figure 1: Decomposing the Experience Profile of Wages
	E(v_j(t)\|t)	E(lnwage\|t)	E(Value of Tenure\|t)	hc(t)
t=0	-0.000723	0	0	0.000723
t=1	0.0106417	0.0727354	0.0175314	0.0445623
t=2	0.0212761	0.140777	0.0304545	0.0890464
t=3	0.0309891	0.2042916	0.0398911	0.1334114
t=4	0.0393305	0.263446	0.0470724	0.177043
t=5	0.0469673	0.318407	0.0525763	0.2188634
t=6	0.0548061	0.3693414	0.0570785	0.2574568
t=7	0.0613715	0.416416	0.0608569	0.2941877
t=8	0.0658475	0.4597976	0.0639856	0.3299645
t=9	0.0707971	0.499653	0.066537	0.3623188
t=10	0.07574	0.536149	0.0689327	0.3914763
t=11	0.080621	0.5694524	0.0709717	0.4178597
t=12	0.0850258	0.59973	0.0724846	0.4422196
t=13	0.0884614	0.6271486	0.0741257	0.4645615
t=14	0.0921014	0.651875	0.0754429	0.4843308
t=15	0.0959058	0.674076	0.0767067	0.5014635
t=16	0.0983978	0.6939184	0.078059	0.5174617
t=17	0.1012991	0.711569	0.0792546	0.5310153
t=18	0.1037449	0.7271946	0.0807312	0.5427185
t=19	0.1050557	0.740962	0.0822982	0.5536081
t=20	0.1076943	0.753038	0.0839408	0.5614028
t=21	0.1103133	0.7635894	0.0859381	0.567338
t=22	0.1123607	0.772783	0.0881813	0.5722409
t=23	0.113441	0.7807856	0.0906591	0.5766855
t=24	0.1153345	0.787764	0.0932302	0.5791993
t=25	0.1166956	0.793885	0.0963713	0.5808181
t=26	0.1190427	0.7993154	0.0997728	0.5804998
t=27	0.1197435	0.804222	0.1032218	0.5812567
t=28	0.1207331	0.8087716	0.1071375	0.580901
t=29	0.1222072	0.813131	0.1110593	0.5798646
t=30	0.1238681	0.817467	0.1154757	0.5781232
t=31	0.1248369	0.8219464	0.1200774	0.5770321
t=32	0.1252288	0.826736	0.1246778	0.5768294
t=33	0.1265531	0.8320026	0.1294194	0.5760301
t=34	0.1273765	0.837913	0.134145	0.5763915
t=35	0.1284124	0.844634	0.138958	0.5772635
t=36	0.1295812	0.8523324	0.1436635	0.5790877
t=37	0.1305422	0.861175	0.148081	0.5825518
t=38	0.1316416	0.8713286	0.1522518	0.5874352
t=39	0.1325513	0.88296	0.1559526	0.5944561

Note: This figure decomposes the experience profile of wages E(lnwage|t) into three components: the contributions of general human capital hc(t), job mobility E(v_j(t)|t), and accumulated job seniority E(Value of Tenure|t). The decomposition is based on the estimates of model A.3.

Return to Figure 1

Figure 2: Comparisons of PSID and Simulated Data
	PSID	SIM_lb	SIM_ub
St Dev of Log Earnings: t= 5	0.5022	0.5526108	0.556026
St Dev of Log Earnings: t= 10	0.6017	0.5731555	0.5759817
St Dev of Log Earnings: t= 15	0.5363	0.5870864	0.5898852
St Dev of Log Earnings: t= 20	0.5559	0.5917328	0.5948295
St Dev of Log Earnings: t= 25	0.5497	0.5896956	0.5930288
St Dev of Log Earnings: t= 30	0.5533	0.5848011	0.5886921
St Dev of Log Earnings: t= 35	0.5705	0.5785969	0.5833659
St Dev of Log Earnings: t= 40	0.6599	0.5686405	0.5738982
St Dev of Log Hours: t= 5	0.2767	0.2924455	0.2937269
St Dev of Log Hours: t= 10	0.3031	0.2955929	0.2968687
St Dev of Log Hours: t= 15	0.273	0.2976496	0.2987694
St Dev of Log Hours: t= 20	0.2731	0.2960505	0.2972099
St Dev of Log Hours: t= 25	0.2745	0.2936345	0.2949899
St Dev of Log Hours: t= 30	0.2722	0.2890809	0.2904337
St Dev of Log Hours: t= 35	0.2914	0.283908	0.2853703
St Dev of Log Hours: t= 40	0.3443	0.2804374	0.2828709
St Dev of Log Wage: t= 5	0.3458	0.3913952	0.3941773
St Dev of Log Wage: t= 10	0.3718	0.4036461	0.4060657
St Dev of Log Wage: t= 15	0.3754	0.4086018	0.4111244
St Dev of Log Wage: t= 20	0.4008	0.4118679	0.4143326
St Dev of Log Wage: t= 25	0.3936	0.4161862	0.4189014
St Dev of Log Wage: t= 30	0.403	0.4203228	0.4233746
St Dev of Log Wage: t= 35	0.4006	0.4216497	0.4254503
St Dev of Log Wage: t= 40	0.4077	0.4222963	0.4260939

Note: This figure compares the actual standard deviations of log earnings, log hours, and log wage in the PSID to the 95 percent confidence interval estimates of the standard deviations based on data simulated from Model A.3. The standard error bands in the figure reflect both sampling error in the estimated "structural" parameters and sampling error due to randomness in the careers of the individuals in a particular sample.

Return to Figure 2

Figure 3: Comparisons of PSID and Simulated Data
	PSID	SIM_lb	SIM_ub
Employment: t=5	0.946	0.9630923	0.9656246
Employment: t=10	0.9569	0.9542401	0.955923
Employment: t=15	0.9651	0.9481215	0.9495604
Employment: t=20	0.9723	0.9522114	0.9536533
Employment: t=25	0.9756	0.9603201	0.9621077
Employment: t=30	0.9864	0.9717414	0.9732811
Employment: t=35	0.9767	0.9830482	0.9851229
Employment: t=40	0.971	0.9910225	0.9930044
Job Change if Employed: t=5	0.1958	0.1708974	0.1769542
Job Change if Employed: t=10	0.1403	0.1422344	0.1444736
Job Change if Employed: t=15	0.08374	0.1123752	0.1141136
Job Change if Employed: t=20	0.06506	0.0839352	0.086095
Job Change if Employed: t=25	0.05571	0.0645707	0.0664879
Job Change if Employed: t=30	0.04809	0.047348	0.0500157
Job Change if Employed: t=35	0.03642	0.0324679	0.0355944
Job Change if Employed: t=40	0.03497	0.020546	0.0253311
Employment-Employment Transition: t=5	0.9822	0.9733456	0.9748966
Employment-Employment Transition: t=10	0.9712	0.9670836	0.9680116
Employment-Employment Transition: t=15	0.9782	0.9645285	0.9655212
Employment-Employment Transition: t=20	0.9782	0.9678894	0.9688025
Employment-Employment Transition: t=25	0.9784	0.9745918	0.9756245
Employment-Employment Transition: t=30	0.99	0.9809164	0.9820269
Employment-Employment Transition: t=35	0.9834	0.9879265	0.9889302
Employment-Employment Transition: t=40	0.9804	0.9918139	0.9933871
Unemployment-Employment Transition: t=5	0.5625	0.8654709	0.8888147
Unemployment-Employment Transition: t=10	0.728	0.7057273	0.7209492
Unemployment-Employment Transition: t=15	0.6522	0.6489489	0.6601535
Unemployment-Employment Transition: t=20	0.8587	0.65492	0.6659011
Unemployment-Employment Transition: t=25	0.8723	0.6589276	0.6754397
Unemployment-Employment Transition: t=30	0.8261	0.7011194	0.7222919
Unemployment-Employment Transition: t=35	0.6786	0.7230669	0.7726837
Unemployment-Employment Transition: t=40	0.6154	0.8923615	0.9325233

Note: This figure compares the PSID sample means and the 95 percent confidence interval estimates of the simulated means for employment, job changes, and employment transitions based on data simulated from Model A.3. The upper left panel shows employment Et; the lower left panel shows job changes JCt conditional on Et = 1 and Et-1 = 1; the upper right panel reports the EE transitions; and the lower right panel displays the UE transitions.

Return to Figure 3

Figure 4: Comparisons of PSID and Simulated Data
	PSID	SIM_lb	SIM_ub
Employment Duration: t=5	4.226	5.051776	5.074306
Employment Duration: t=10	6.641	8.772431	8.81734
Employment Duration: t=15	9.684	12.45054	12.50348
Employment Duration: t=20	12.62	15.91484	15.97899
Employment Duration: t=25	15.77	19.11671	19.19547
Employment Duration: t=30	17.42	22.36735	22.48027
Employment Duration: t=35	19.57	25.56078	25.75193
Employment Duration: t=40	21.39	28.35865	28.62372
Tenure: t= 5	3.021	2.611605	2.645699
Tenure: t= 10	4.8	4.643457	4.686145
Tenure: t= 15	7.311	6.982478	7.032105
Tenure: t= 20	9.941	9.63081	9.701004
Tenure: t= 25	12.76	12.35442	12.46287
Tenure: t= 30	15.05	15.34586	15.49532
Tenure: t= 35	17.57	18.29121	18.48699
Tenure: t= 40	19.34	21.10426	21.41497
Unemployment Duration: t=5	1.604	1.202208	1.245411
Unemployment Duration: t=10	1.539	1.52336	1.598305
Unemployment Duration: t=15	1.624	1.809824	1.897379
Unemployment Duration: t=20	1.419	1.978691	2.110605
Unemployment Duration: t=25	1.303	2.169302	2.305253
Unemployment Duration: t=30	1.167	2.123029	2.377656
Unemployment Duration: t=35	1.394	1.997938	2.610629
Unemployment Duration: t=40	1.348	1.363047	1.721163

Note: This figure compares the PSID sample means (by potential experience) and the 95 percent confidence interval estimates of the means (by potential experience) based on data simulated from Model A.3, for employment duration, tenure, and unemployment duration.

Return to Figure 4

Figure 5a: Mean Response of Log Earnings to Various Shocks at t=10
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock	job change + 1SD 'xi' shock
t=1	0	0	0	0	0
t=2	0	0	0	0	0
t=3	0	0	0	0	0
t=4	0	0	0	0	0
t=5	0	0	0	0	0
t=6	0	0	0	0	0
t=7	0	0	0	0	0
t=8	0	0	0	0	0
t=9	0	0	0	0	0
t=10	-0.6241579	0.0875552	-0.0867085	0.1498458	0.0628459
t=11	-0.2059433	0.0805449	-0.0671065	0.1532135	0.0489173
t=12	-0.1642206	0.0741756	-0.0530698	0.1524069	0.0433919
t=13	-0.1401582	0.0681	-0.0425224	0.1505611	0.0418787
t=14	-0.1219451	0.0625908	-0.0337658	0.1484833	0.0418644
t=15	-0.1073909	0.0575328	-0.0269384	0.1466455	0.0421469
t=16	-0.0954871	0.0528495	-0.0217609	0.1440151	0.0426507
t=17	-0.0843849	0.0485947	-0.0171895	0.1419063	0.0436583
t=18	-0.075218	0.0445988	-0.013809	0.1392682	0.0441902
t=19	-0.0671473	0.0410047	-0.011256	0.1369779	0.0446129
t=20	-0.0599961	0.0376179	-0.0092754	0.1337175	0.0448732
t=21	-0.0547636	0.0345755	-0.0078785	0.1312864	0.0447907
t=22	-0.049309	0.031743	-0.0067601	0.1290057	0.0448205
t=23	-0.0448015	0.0291336	-0.0058846	0.1268308	0.0448005
t=24	-0.0410113	0.0268223	-0.0051403	0.1245832	0.0447993
t=25	-0.0377159	0.0246482	-0.0040953	0.1228547	0.0452244
t=26	-0.0345724	0.0226734	-0.0035095	0.1212234	0.0453093
t=27	-0.0314443	0.0209091	-0.0025897	0.1204083	0.0457089
t=28	-0.0288031	0.0192256	-0.0018587	0.1195352	0.0461571
t=29	-0.0262952	0.0176022	-0.0010157	0.1190722	0.0467184
t=30	-0.0239475	0.0162449	-9.89e-05	0.1191015	0.0473819
t=31	-0.0212955	0.0149436	0.0002525	0.118511	0.0476
t=32	-0.019557	0.0137234	0.0005853	0.1181614	0.0477622
t=33	-0.0180743	0.0126412	0.0008404	0.1175933	0.04793
t=34	-0.0166221	0.0116913	0.0011358	0.1174033	0.0480945
t=35	-0.0154271	0.0107467	0.001276	0.1169312	0.0481482
t=36	-0.0144432	0.009887	0.0013134	0.1166143	0.0481281
t=37	-0.0134773	0.0090916	0.0014782	0.1164706	0.0482366
t=38	-0.0124149	0.0083477	0.0016954	0.1163204	0.0484269
t=39	-0.01162	0.0076771	0.0017662	0.1162126	0.0484817
t=40	-0.0109043	0.007066	0.001749	0.1160247	0.0484474

Note: This figure shows the impulse response of log earnings to various shocks that occur when t =10. The diamond line reports the response of the mean of log earnings to a one-standard-deviation shock to the error term in the autoregressive component of wages, while the line with circles shows the effect of becoming unemployed. The remaining three lines report the response of log earnings to an exogenous job change: The line marked with "x" shows the average response. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean, or .269. The line with squares shows the effect of an exogenous job change that is accompanied by a one-standard-deviation increase of .157 in the job-specific hours component.

Return to Figure 5a

Figure 5b: Mean Response of Log Wage to Various Shocks at t=10
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock
t=1	0	0	0	0
t=2	0	0	0	0
t=3	0	0	0	0
t=4	0	0	0	0
t=5	0	0	0	0
t=6	0	0	0	0
t=7	0	0	0	0
t=8	0	0	0	0
t=9	0	0	0	0
t=10	-0.2488575	0.0942552	-0.0924389	0.1617074
t=11	-0.18397	0.0866506	-0.0717115	0.1651797
t=12	-0.1587875	0.0797272	-0.0565507	0.1643269
t=13	-0.1388094	0.0733094	-0.0448272	0.1628308
t=14	-0.1221836	0.0673645	-0.0355947	0.1605587
t=15	-0.1085722	0.0619738	-0.0284162	0.1582069
t=16	-0.0968797	0.0569642	-0.0226562	0.1554065
t=17	-0.0869589	0.052336	-0.0181651	0.152622
t=18	-0.0780873	0.0480721	-0.014534	0.1498435
t=19	-0.0703793	0.0441744	-0.0119534	0.147119
t=20	-0.0633833	0.0405653	-0.009824	0.1439421
t=21	-0.0579765	0.03725	-0.0084875	0.1410437
t=22	-0.052613	0.0342307	-0.0072272	0.1385994
t=23	-0.0478272	0.0314362	-0.0061991	0.1364093
t=24	-0.0437007	0.0289114	-0.0053535	0.1341331
t=25	-0.0401192	0.0265601	-0.0044165	0.1321871
t=26	-0.0369446	0.0244029	-0.0037663	0.1304607
t=27	-0.0337799	0.0224874	-0.0029256	0.1293199
t=28	-0.0307803	0.0206928	-0.0020921	0.1285651
t=29	-0.0281253	0.0189655	-0.0011561	0.1281726
t=30	-0.0255265	0.0174766	2.81e-05	0.1282775
t=31	-0.0228224	0.0160761	0.0003574	0.12767
t=32	-0.0209088	0.0147698	0.0006769	0.1271698
t=33	-0.0191705	0.0135822	0.0010779	0.126708
t=34	-0.0175838	0.0125041	0.0013423	0.1263008
t=35	-0.0162489	0.0115125	0.0016084	0.1258912
t=36	-0.0151556	0.0105948	0.0017438	0.1255403
t=37	-0.0140109	0.0097356	0.0019236	0.1253304
t=38	-0.0128796	0.0089426	0.002049	0.1251631
t=39	-0.0120568	0.0082214	0.002136	0.1250098
t=40	-0.0112386	0.0075648	0.0021653	0.1248651

Note: This figure shows the impulse response of log wage to various shocks that occur when t =10. The diamond line reports the response of the mean of log wage to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean, or .269.

Return to Figure 5b

Figure 5c: Mean Response of Log Hours to Various Shocks at t=10
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock	job change + 1SD 'xi' shock
t=1	0	0	0	0	0
t=2	0	0	0	0	0
t=3	0	0	0	0	0
t=4	0	0	0	0	0
t=5	0	0	0	0	0
t=6	0	0	0	0	0
t=7	0	0	0	0	0
t=8	0	0	0	0	0
t=9	0	0	0	0	0
t=10	-0.3753004	-0.0067	0.0057302	-0.0118618	0.1552844
t=11	-0.0219736	-0.0061059	0.0046048	-0.0119662	0.1206288
t=12	-0.0054331	-0.0055513	0.0034804	-0.01192	0.0999422
t=13	-0.001349	-0.0052094	0.0023046	-0.01227	0.0867057
t=14	0.0002384	-0.0047731	0.0018291	-0.0120749	0.0774593
t=15	0.0011811	-0.0044413	0.0014772	-0.0115619	0.0705628
t=16	0.0013928	-0.0041142	0.0008955	-0.0113912	0.0653071
t=17	0.002574	-0.0037413	0.0009756	-0.010716	0.0618234
t=18	0.0028696	-0.0034733	0.0007248	-0.0105753	0.0587239
t=19	0.003232	-0.0031695	0.0006976	-0.0101409	0.0565662
t=20	0.003387	-0.0029478	0.0005484	-0.0102253	0.054697
t=21	0.0032129	-0.0026741	0.0006089	-0.009757	0.0532784
t=22	0.003304	-0.0024872	0.0004673	-0.0095935	0.0520477
t=23	0.0030255	-0.0023026	0.0003142	-0.0095782	0.0509996
t=24	0.0026894	-0.002089	0.0002131	-0.0095501	0.0501528
t=25	0.0024033	-0.0019121	0.0003209	-0.0093327	0.0496407
t=26	0.0023723	-0.0017295	0.0002565	-0.0092368	0.0490756
t=27	0.0023355	-0.0015783	0.0003357	-0.0089116	0.0486345
t=28	0.0019774	-0.0014672	0.0002337	-0.0090294	0.0482497
t=29	0.0018301	-0.0013628	0.0001407	-0.0091004	0.0478749
t=30	0.0015788	-0.0012321	-0.0001273	-0.0091763	0.0473537
t=31	0.0015268	-0.0011325	-0.0001049	-0.0091591	0.0472426
t=32	0.0013518	-0.0010467	-9.16e-05	-0.0090084	0.0470853
t=33	0.0010962	-0.0009408	-0.0002375	-0.0091147	0.0468521
t=34	0.0009618	-0.000813	-0.0002069	-0.0088978	0.046752
t=35	0.0008216	-0.0007658	-0.0003324	-0.0089602	0.0465398
t=36	0.0007124	-0.0007076	-0.0004301	-0.0089259	0.0463843
t=37	0.0005336	-0.0006442	-0.0004454	-0.0088596	0.0463133
t=38	0.0004649	-0.0005946	-0.0003533	-0.0088425	0.0463781
t=39	0.0004373	-0.0005441	-0.0003695	-0.0087972	0.0463462
t=40	0.0003343	-0.0004988	-0.0004168	-0.0088406	0.0462818

Note: This figure shows the impulse response of log hours to various shocks that occur when t =10. The diamond line reports the response of the mean of log hours to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean, or .269. The line with squares shows the effect of an exogenous job change accompanied by a one-standard-deviation increase of .157 in the job-specific hours component.

Return to Figure 5c

Figure 6a: Response of Cross-Sectional Variance of the First Difference of Log Earnings to Various Shocks at t=10
	unemployment shock	1SD 'w' shock	job change shock
t=2	1	1	1
t=3	1	1	1
t=4	1	1	1
t=5	1	1	1
t=6	1	1	1
t=7	1	1	1
t=8	1	1	1
t=9	1	1	1
t=10	0.9930112	0.9526839	1.580719
t=11	1.471174	1.000726	1.023217
t=12	1.147958	1.00071	1.015855
t=13	1.10246	1.00125	1.023076
t=14	1.081245	1.000794	1.01757
t=15	1.06565	1.001348	1.010627
t=16	1.0614	1.000528	1.012339
t=17	1.039841	1.000998	1.011357
t=18	1.029171	1.000237	1.008473
t=19	1.027104	1.000835	1.006844
t=20	1.013011	1.000775	1.006914
t=21	1.011947	0.9999406	1.006622
t=22	1.012813	1.000653	1.006553
t=23	1.00546	1.000344	1.003622
t=24	1.008244	0.999823	1.004843
t=25	1.005819	1.00035	1.002245
t=26	1.005068	1.000388	1.002555
t=27	1.003797	1.00063	1.002876
t=28	1.001529	1.000776	0.9995847
t=29	1.003936	1.000466	1.00373
t=30	1.002191	1.00074	1.00103
t=31	1.000641	0.9998961	1.000371
t=32	1.003684	0.9999172	1.002782
t=33	1.004348	1.000591	1.002675
t=34	1.000053	1.000474	0.9990577
t=35	1.001643	0.9999005	1.00149
t=36	1.001157	1.000044	1.001778
t=37	1.001146	1.00005	1.001137
t=38	1.001428	1.000131	1.000556
t=39	0.9993528	0.9999992	0.9996244
t=40	1.00086	0.9999898	1.000159

Note: This figure shows the behavior of the ratio of var(earnit - earni,t-1) following an exogenous shock at t = 10 to the baseline variance for the model. The diamond line reports the response of the ratio to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change.

Return to Figure 6a

Figure 6b: Response of Cross-Sectional Variance of Log Earnings to Various Shocks at t=10
	unemployment shock	1SD 'w' shock	job change shock
t=1	1	1	1
t=2	1	1	1
t=3	1	1	1
t=4	1	1	1
t=5	1	1	1
t=6	1	1	1
t=7	1	1	1
t=8	1	1	1
t=9	1	1	1
t=10	0.8243826	0.9844208	0.9960754
t=11	1.08472	0.986682	1.003498
t=12	1.060538	0.9892476	1.014076
t=13	1.051613	0.9907091	1.016014
t=14	1.050452	0.9932399	1.020489
t=15	1.048867	0.9947613	1.023576
t=16	1.049225	0.9956948	1.02623
t=17	1.047093	0.9966399	1.024773
t=18	1.046751	0.997723	1.027369
t=19	1.042997	0.9980478	1.029351
t=20	1.04237	0.9986187	1.030203
t=21	1.041435	0.9988884	1.029973
t=22	1.036909	0.9997324	1.026438
t=23	1.037405	0.9997149	1.026878
t=24	1.037084	0.9997832	1.027895
t=25	1.035498	0.999734	1.028851
t=26	1.033296	0.9998894	1.027019
t=27	1.030757	1.000265	1.026287
t=28	1.031165	1.000357	1.030057
t=29	1.032262	1.000813	1.029752
t=30	1.030435	1.000167	1.029761
t=31	1.030754	1.000269	1.0309
t=32	1.030033	1.000452	1.030975
t=33	1.031665	1.000413	1.033239
t=34	1.028535	1.000364	1.028963
t=35	1.029817	1.000506	1.031705
t=36	1.031163	1.00041	1.030989
t=37	1.033989	1.000369	1.030167
t=38	1.033158	1.000356	1.030645
t=39	1.03274	1.000466	1.031595
t=40	1.030566	1.000526	1.029576

Note: This figure shows the behavior of the ratio of the cross-sectional variance of log earnings following an exogenous shock at t = 10 to the baseline variance for the model. The diamond line reports the response of the ratio to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change.

Return to Figure 6b

Figure 7a: Mean Response of Log Earnings to Various Shocks at t=10 SRC Sample
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock	job change + 1SD 'xi' shock
t=1	0	0	0	0	0
t=2	0	0	0	0	0
t=3	0	0	0	0	0
t=4	0	0	0	0	0
t=5	0	0	0	0	0
t=6	0	0	0	0	0
t=7	0	0	0	0	0
t=8	0	0	0	0	0
t=9	0	0	0	0	0
t=10	-0.6133108	0.0836022	-0.0899301	0.1477582	0.0671427
t=11	-0.2001429	0.0768261	-0.0692019	0.1508126	0.0549686
t=12	-0.1596603	0.0705781	-0.0539317	0.1510367	0.0505419
t=13	-0.1395395	0.0649002	-0.0436909	0.1487889	0.0485017
t=14	-0.1235251	0.0596228	-0.0349612	0.1467078	0.0478799
t=15	-0.1113768	0.0547121	-0.0278041	0.1440828	0.0474274
t=16	-0.0991406	0.0501621	-0.0223308	0.14183	0.04778
t=17	-0.0874763	0.0460355	-0.0176616	0.1397409	0.0480118
t=18	-0.0792503	0.0424423	-0.0147312	0.1370103	0.04774
t=19	-0.0709939	0.0390205	-0.0123084	0.1348436	0.0478222
t=20	-0.0624785	0.0359223	-0.0101633	0.1327488	0.0480573
t=21	-0.0567145	0.0330389	-0.0089884	0.1299725	0.0478194
t=22	-0.0515771	0.0304461	-0.0078418	0.128006	0.0477641
t=23	-0.0472367	0.0279429	-0.0071208	0.1259942	0.0474093
t=24	-0.0433037	0.0256178	-0.0062203	0.1242402	0.0475907
t=25	-0.0398147	0.0236263	-0.0054564	0.1229427	0.0477593
t=26	-0.0367775	0.0217962	-0.0044839	0.1217275	0.0481706
t=27	-0.0339582	0.0199764	-0.0036485	0.1208589	0.0485337
t=28	-0.0309882	0.0183535	-0.0029242	0.1206057	0.0488687
t=29	-0.0283024	0.016912	-0.0021217	0.1203997	0.049401
t=30	-0.0260143	0.0155282	-0.0010521	0.1204045	0.0502369
t=31	-0.0238225	0.0142624	-0.0009046	0.1198337	0.0502434
t=32	-0.0220406	0.0131249	-0.0004783	0.1195097	0.0505316
t=33	-0.0205793	0.0120354	-0.0004878	0.1191285	0.0504899
t=34	-0.0192049	0.0110648	-0.00036	0.1188402	0.0505378
t=35	-0.0180161	0.0101829	-6.68E-06	0.1188304	0.0508568
t=36	-0.0169492	0.0093732	0.0001457	0.1185684	0.0509748
t=37	-0.0159535	0.0085964	0.0001855	0.1184051	0.0509586
t=38	-0.0149813	0.0078952	0.0002255	0.1183169	0.0509765
t=39	-0.0143251	0.0072384	0.000247	0.118232	0.0509908
t=40	-0.013669	0.0066471	0.0002098	0.11812	0.0509529

Note: This figure shows the impulse response of log earnings to various shocks that occur when t = 10 using the SRC sample only. The diamond line reports the response of the mean of log earnings to a one-standard-deviation shock to the error term in the autoregressive component of wages, while the line with circles shows the effect of becoming unemployed. The remaining three lines report the response of log earnings to an exogenous job change: The line marked with "x" shows the average response. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean. The line with squares shows the effect of an exogenous job change that is accompanied by a one-standard-deviation increase in the job-specific hours component.

Return to Figure 7a

Figure 7b: Mean Response of Log Earnings to Various Shocks at t=10 SRC White, Low Education Sample
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock	job change + 1SD 'xi' shock
t=1	0	0	0	0	0
t=2	0	0	0	0	0
t=3	0	0	0	0	0
t=4	0	0	0	0	0
t=5	0	0	0	0	0
t=6	0	0	0	0	0
t=7	0	0	0	0	0
t=8	0	0	0	0	0
t=9	0	0	0	0	0
t=10	-0.6101625	0.0625346	-0.0605958	0.1536591	0.074435
t=11	-0.2497869	0.0554991	-0.0452397	0.1436267	0.0506532
t=12	-0.182128	0.0497208	-0.0364494	0.1347959	0.0388181
t=13	-0.1546211	0.0445704	-0.0285304	0.1272528	0.0355322
t=14	-0.135607	0.0396399	-0.0230553	0.1209986	0.0328228
t=15	-0.1230013	0.035238	-0.0172806	0.1174896	0.032815
t=16	-0.1109216	0.0324011	-0.0149016	0.112649	0.0306084
t=17	-0.0962644	0.0283077	-0.0111992	0.1095622	0.0317833
t=18	-0.0861163	0.0257862	-0.0099277	0.1061261	0.0312116
t=19	-0.0770674	0.0228634	-0.0072131	0.1034381	0.0323806
t=20	-0.0679753	0.0204556	-0.0052838	0.1018047	0.0331695
t=21	-0.0599248	0.0185044	-0.0041502	0.0998836	0.033473
t=22	-0.0524573	0.0167608	-0.0034573	0.098789	0.0334899
t=23	-0.0471783	0.0148757	-0.0030129	0.0965314	0.0334184
t=24	-0.0426278	0.0127158	-0.0029716	0.0938215	0.0329263
t=25	-0.0375106	0.0115306	-0.0019877	0.093184	0.033603
t=26	-0.0332043	0.0104442	-0.000833	0.0936115	0.0343785
t=27	-0.0290613	0.0094135	0.0002003	0.0932827	0.0349903
t=28	-0.0276918	0.0085552	-0.0008104	0.0918653	0.0338452
t=29	-0.0253954	0.0074818	-0.0005751	0.0922213	0.0339088
t=30	-0.0222859	0.0068798	0.0009053	0.0926313	0.0352705
t=31	-0.0189614	0.0061233	0.001456	0.0928113	0.0356588
t=32	-0.0172963	0.0053964	0.0015862	0.0926926	0.0356104
t=33	-0.0155413	0.0048962	0.0017204	0.0922923	0.0356116
t=34	-0.0136569	0.0044487	0.0018778	0.0923033	0.0356257
t=35	-0.0119963	0.0039344	0.0024858	0.0924478	0.0361645
t=36	-0.0110228	0.0034907	0.0022895	0.0921791	0.0359001
t=37	-0.0103929	0.003072	0.0021155	0.0918298	0.0356669
t=38	-0.0093279	0.0027914	0.0024188	0.0919344	0.0359523
t=39	-0.0086875	0.0024951	0.0025249	0.092108	0.0360453
t=40	-0.0077927	0.0022271	0.0026886	0.0922675	0.0362089

Note: This figure shows the impulse response of the mean of log earnings to various shocks that occur when t = 10 using the SRC White, Low Education sample only. The diamond line reports the response to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The remaining three lines report the response to an exogenous job change: The line marked with "x" shows the average response. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean. The line with squares shows the effect of an exogenous job change that is accompanied by a one-standard-deviation increase in the job-specific hours component.

Return to Figure 7b

Figure 7c: Mean Response of Log Earnings to Various Shocks at t=10 SRC White, High Education Sample
	unemployment shock	1SD 'w' shock	job change shock	job change + 1SD 'v' shock	job change + 1SD 'xi' shock
t=1	0	0	0	0	0
t=2	0	0	0	0	0
t=3	0	0	0	0	0
t=4	0	0	0	0	0
t=5	0	0	0	0	0
t=6	0	0	0	0	0
t=7	0	0	0	0	0
t=8	0	0	0	0	0
t=9	0	0	0	0	0
t=10	-0.6786697	0.0879624	-0.0895762	0.1631482	0.092761
t=11	-0.2056956	0.0786157	-0.0680852	0.1688573	0.0801177
t=12	-0.1901617	0.0710459	-0.0525036	0.1702309	0.0723119
t=13	-0.1664026	0.0634413	-0.0416274	0.1684895	0.0679877
t=14	-0.1492813	0.056514	-0.0323405	0.1665335	0.0641997
t=15	-0.135596	0.0505385	-0.0247455	0.1645992	0.061363
t=16	-0.1202798	0.0453048	-0.0177081	0.1616542	0.0599685
t=17	-0.1047773	0.0403612	-0.0123181	0.1587474	0.0597329
t=18	-0.0939507	0.0365591	-0.0087066	0.1558323	0.0583591
t=19	-0.0836256	0.0328622	-0.0059733	0.1526098	0.0576229
t=20	-0.0721564	0.0294654	-0.0038733	0.1501312	0.0566423
t=21	-0.0634913	0.0267868	-0.0019023	0.1473727	0.0562816
t=22	-0.0565236	0.0242333	-0.0010149	0.1449161	0.0552635
t=23	-0.0493746	0.0213501	-0.0003195	0.1431458	0.0544279
t=24	-0.0427029	0.019208	0.0008178	0.1420622	0.0545244
t=25	-0.0384481	0.0172863	0.0017076	0.1406021	0.0547895
t=26	-0.0348971	0.0155597	0.0034707	0.1401157	0.0558085
t=27	-0.0303853	0.0141127	0.0049112	0.1401565	0.0566342
t=28	-0.0267527	0.0126271	0.0054412	0.1397071	0.0569334
t=29	-0.0238602	0.0113859	0.0064893	0.1399117	0.057754
t=30	-0.0210242	0.0103889	0.0074053	0.1404824	0.0584307
t=31	-0.0181246	0.0093694	0.0077486	0.1404967	0.058671
t=32	-0.0162263	0.0084991	0.0081601	0.1405196	0.0589685
t=33	-0.0146413	0.0075269	0.0085115	0.1405358	0.0592732
t=34	-0.0131302	0.0068192	0.0089808	0.140986	0.0597219
t=35	-0.0116057	0.0061436	0.0092964	0.1409502	0.0600376
t=36	-0.0102692	0.0055389	0.0094862	0.141212	0.0602269
t=37	-0.009234	0.0049815	0.0095458	0.1414814	0.0602427
t=38	-0.0084147	0.004488	0.0096049	0.1415095	0.0603018
t=39	-0.0076222	0.0040445	0.0096984	0.1416812	0.0603952
t=40	-0.006887	0.0036449	0.0097609	0.1418371	0.0604577

Note: This figure shows the impulse response of the mean of log earnings to various shocks that occur when t = 10 using the SRC White, High Education sample only. The diamond line reports the response to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The remaining three lines report the response to an exogenous job change: The line marked with "x" shows the average response. The line with triangles is the effect of an exogenous job change accompanied by a value of the job-specific wage component that is one standard deviation above its mean. The line with squares shows the effect of an exogenous job change that is accompanied by a one-standard-deviation increase in the job-specific hours component.

Return to Figure 7c

Figure A1: Comparisons of PSID and Simulated Data - Model B.1
	PSID	SIM_lower	SIM_upper
St Dev of Log Earnings: t=5	0.5022	0.5613655	0.5648203
St Dev of Log Earnings: t=10	0.6017	0.5756183	0.5787853
St Dev of Log Earnings: t=15	0.5363	0.5855305	0.5886414
St Dev of Log Earnings: t=20	0.5559	0.5893239	0.5923414
St Dev of Log Earnings: t=25	0.5497	0.5888035	0.5922367
St Dev of Log Earnings: t=30	0.5533	0.5862343	0.5908136
St Dev of Log Earnings: t=35	0.5705	0.5724972	0.5788923
St Dev of Log Earnings: t=40	0.6599	0.5625976	0.5686387
St Dev of Log Hours: t=5	0.2767	0.2845417	0.2864617
St Dev of Log Hours: t=10	0.3031	0.2868929	0.2881751
St Dev of Log Hours: t=15	0.273	0.2913459	0.2924092
St Dev of Log Hours: t=20	0.2731	0.2891721	0.2903469
St Dev of Log Hours: t=25	0.2745	0.2867436	0.2877411
St Dev of Log Hours: t=30	0.2722	0.2814888	0.2829584
St Dev of Log Hours: t=35	0.2914	0.2738366	0.2752563
St Dev of Log Hours: t=40	0.3443	0.2712559	0.2727995
St Dev of Log Wage: t=5	0.3458	0.3947636	0.3962691
St Dev of Log Wage: t=10	0.3718	0.4026172	0.4043089
St Dev of Log Wage: t=15	0.3754	0.4041475	0.4062315
St Dev of Log Wage: t=20	0.4008	0.4017406	0.4036967
St Dev of Log Wage: t=25	0.3936	0.3990079	0.4012962
St Dev of Log Wage: t=30	0.403	0.4013103	0.4040518
St Dev of Log Wage: t=35	0.4006	0.4002648	0.4034482
St Dev of Log Wage: t=40	0.4077	0.3973821	0.4015679

Note: This figure compares the actual standard deviations of log earnings, log hours, and log wage in the PSID to the 95 percent confidence interval estimates of the standard deviations based on data simulated from Model B.1. The standard error bands in the figure reflect both sampling error in the estimated "structural" parameters and sampling error due to randomness in the careers of the individuals in a particular sample.

Return to Figure A1

Figure A2: Comparisons of PSID and Simulated Data - Model B.1
	PSID	SIM_lower	SIM_upper
Employment: t=5	0.946	0.962387	0.9661263
Employment: t=10	0.9569	0.9568272	0.958657
Employment: t=15	0.9651	0.9495772	0.9510498
Employment: t=20	0.9723	0.9517217	0.9534572
Employment: t=25	0.9756	0.95785	0.9593471
Employment: t=30	0.9864	0.969511	0.9718164
Employment: t=35	0.9767	0.9835376	0.9854798
Employment: t=40	0.971	0.9924629	0.9943383
Job Change if Employed: t=5	0.1958	0.175668	0.1823893
Job Change if Employed: t=10	0.1403	0.1449082	0.1474672
Job Change if Employed: t=15	0.08374	0.1104751	0.1122465
Job Change if Employed: t=20	0.06506	0.0825399	0.0847843
Job Change if Employed: t=25	0.05571	0.0630165	0.0648987
Job Change if Employed: t=30	0.04809	0.0466332	0.0491164
Job Change if Employed: t=35	0.03642	0.0345349	0.0380318
Job Change if Employed: t=40	0.03497	0.024282	0.0309988
Employment-Employment Transition: t=5	0.9822	0.9728044	0.9746206
Employment-Employment Transition: t=10	0.9712	0.9690137	0.9700847
Employment-Employment Transition: t=15	0.9782	0.9642355	0.9651163
Employment-Employment Transition: t=20	0.9782	0.96628	0.9672067
Employment-Employment Transition: t=25	0.9784	0.9717988	0.9728947
Employment-Employment Transition: t=30	0.99	0.9804069	0.9819301
Employment-Employment Transition: t=35	0.9834	0.9897851	0.9910215
Employment-Employment Transition: t=40	0.9804	0.9952089	0.9961014
Unemployment-Employment Transition: t=5	0.5625	0.8177418	0.8461238
Unemployment-Employment Transition: t=10	0.728	0.7104341	0.7265991
Unemployment-Employment Transition: t=15	0.6522	0.6786252	0.6924052
Unemployment-Employment Transition: t=20	0.8587	0.6811439	0.695017
Unemployment-Employment Transition: t=25	0.8723	0.6675604	0.6784198
Unemployment-Employment Transition: t=30	0.8261	0.6684856	0.6924537
Unemployment-Employment Transition: t=35	0.6786	0.6343018	0.6789165
Unemployment-Employment Transition: t=40	0.6154	0.710461	0.782222

Note: This figure compares the PSID sample means and the 95 percent confidence interval estimates of the simulated means for employment, job changes, and employment transitions based on data simulated from Model B.1. The upper left panel shows employment Et; the lower left panel shows job changes JCt conditional on Et = 1 and Et-1 = 1; the upper right panel reports the EE transitions; and the lower right panel displays the UE transitions.

Return to Figure A2

Figure A3: Comparisons of PSID and Simulated Data - Model B.1
	PSID	SIM_lower	SIM_upper
Employment Duration: t=5	4.226	5.050192	5.074073
Employment Duration: t=10	6.641	8.797948	8.851859
Employment Duration: t=15	9.684	12.48961	12.54436
Employment Duration: t=20	12.62	15.84176	15.8951
Employment Duration: t=25	15.77	18.92628	19.00567
Employment Duration: t=30	17.42	21.97568	22.09273
Employment Duration: t=35	19.57	25.31553	25.48235
Employment Duration: t=40	21.39	28.2464	28.46955
Tenure: t=5	3.021	2.523354	2.563984
Tenure: t=10	4.8	4.578267	4.630015
Tenure: t=15	7.311	6.931039	6.984604
Tenure: t=20	9.941	9.545419	9.604796
Tenure: t=25	12.76	12.2711	12.34938
Tenure: t=30	15.05	15.07961	15.19695
Tenure: t=35	17.57	18.20168	18.39052
Tenure: t=40	19.34	20.95991	21.30506
Unemployment Duration: t=5	1.604	1.297545	1.340631
Unemployment Duration: t=10	1.539	1.522835	1.595713
Unemployment Duration: t=15	1.624	1.729937	1.798991
Unemployment Duration: t=20	1.419	1.867242	1.961393
Unemployment Duration: t=25	1.303	2.04938	2.184828
Unemployment Duration: t=30	1.167	2.44053	2.753558
Unemployment Duration: t=35	1.394	2.42824	3.225781
Unemployment Duration: t=40	1.348	3.006294	3.452305

Note: This figure compares the PSID sample means (by potential experience) and the 95 percent confidence interval estimates of the means (by potential experience) based on data simulated from Model B.1, for employment duration, tenure, and unemployment duration.

Return to Figure A3

Figure A4: Mean Response of Log Earnings to Various Shocks at t=10 Model B.1
	unemployment shock	1SD 'w' shock	job change shock
t=1	0	0	0
t=2	0	0	0
t=3	0	0	0
t=4	0	0	0
t=5	0	0	0
t=6	0	0	0
t=7	0	0	0
t=8	0	0	0
t=9	0	0	0
t=10	-0.5601966	0.1145189	0.0226731
t=11	-0.1391454	0.1044419	0.022388
t=12	-0.1138699	0.0954049	0.0216584
t=13	-0.0998693	0.0876222	0.0209229
t=14	-0.0910668	0.0806999	0.0201952
t=15	-0.0833967	0.0746157	0.0196214
t=16	-0.0759153	0.0691569	0.0188987
t=17	-0.0693319	0.0642371	0.0180626
t=18	-0.0631006	0.0597968	0.0174544
t=19	-0.0565355	0.0558224	0.0166559
t=20	-0.0515292	0.0521317	0.0160069
t=21	-0.0471053	0.0488605	0.0151694
t=22	-0.0439868	0.0457985	0.0143435
t=23	-0.0405412	0.0430295	0.013768
t=24	-0.0374782	0.0405185	0.0131149
t=25	-0.0349619	0.0382142	0.012481
t=26	-0.0326939	0.0360641	0.012023
t=27	-0.0304921	0.0341103	0.0114644
t=28	-0.0285902	0.0323136	0.0109348
t=29	-0.0268891	0.0306246	0.0104599
t=30	-0.0253346	0.0290596	0.0100012
t=31	-0.0239525	0.0276041	0.0095503
t=32	-0.0226436	0.0262554	0.0091605
t=33	-0.0214634	0.0249953	0.0087655
t=34	-0.020396	0.0238085	0.0083804
t=35	-0.0193467	0.0227017	0.0080445
t=36	-0.0184753	0.021657	0.0076702
t=37	-0.0176051	0.0206759	0.0073345
t=38	-0.0167916	0.0197477	0.0070071
t=39	-0.0159883	0.0188692	0.0067134
t=40	-0.015255	0.0180418	0.0064106

Note: This figure shows the impulse response of the mean of log earnings to various shocks that occur when t =10 for Model B.1. The diamond line reports the response to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line with triangles is the effect of an exogenous job change.

Return to Figure A4

Figure A5: Mean Response of Log Wage to Various Shocks at t=10 Model B.1
	unemployment shock	1SD 'w' shock	job change shock
t=1	0	0	0
t=2	0	0	0
t=3	0	0	0
t=4	0	0	0
t=5	0	0	0
t=6	0	0	0
t=7	0	0	0
t=8	0	0	0
t=9	0	0	0
t=10	-0.182241	0.1262453	0.0249946
t=11	-0.1054051	0.1151366	0.0246809
t=12	-0.0967863	0.1051741	0.0238762
t=13	-0.0898218	0.0965946	0.0230653
t=14	-0.0840266	0.0889633	0.0222631
t=15	-0.0783908	0.0822561	0.0216303
t=16	-0.0728245	0.0762386	0.0208342
t=17	-0.0679021	0.0708151	0.0199122
t=18	-0.0630314	0.0659199	0.0192418
t=19	-0.0580797	0.0615385	0.0183616
t=20	-0.0538473	0.0574698	0.0176458
t=21	-0.0500884	0.0538638	0.0167227
t=22	-0.0468087	0.0504882	0.0158124
t=23	-0.0436041	0.0474355	0.0151777
t=24	-0.0405047	0.0446672	0.0144577
t=25	-0.0379782	0.0421274	0.0137591
t=26	-0.0355172	0.039757	0.0132542
t=27	-0.0333672	0.0376029	0.0126381
t=28	-0.0313692	0.0356224	0.0120547
t=29	-0.0295138	0.0337605	0.0115309
t=30	-0.0278695	0.0320354	0.0110254
t=31	-0.0263557	0.0304308	0.0105281
t=32	-0.0249028	0.0289438	0.0100985
t=33	-0.0236316	0.027555	0.0096631
t=34	-0.0224745	0.0262463	0.0092385
t=35	-0.0213375	0.0250261	0.0088682
t=36	-0.0203671	0.0238745	0.0084555
t=37	-0.019408	0.0227931	0.0080855
t=38	-0.0185108	0.0217698	0.0077248
t=39	-0.0176353	0.0208015	0.007401
t=40	-0.0168171	0.0198891	0.007067

Note: This figure shows the impulse response of the mean of log wage to various shocks that occur when t =10 for Model B.1. The diamond line reports the response to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line with triangles is the effect of an exogenous job change.

Return to Figure A5

Figure A6: Mean Response of Log Hours to Various Shocks at t=10 Model B.1
	unemployment shock	1SD 'w' shock	job change shock
t=1	0	0	0
t=2	0	0	0
t=3	0	0	0
t=4	0	0	0
t=5	0	0	0
t=6	0	0	0
t=7	0	0	0
t=8	0	0	0
t=9	0	0	0
t=10	-0.3779559	-0.0117264	-0.0023217
t=11	-0.0337405	-0.010695	-0.0022926
t=12	-0.0170836	-0.009769	-0.0022178
t=13	-0.0100474	-0.0089722	-0.0021424
t=14	-0.0070405	-0.0082636	-0.002068
t=15	-0.0050058	-0.0076404	-0.0020089
t=16	-0.0030909	-0.0070815	-0.0019355
t=17	-0.0014296	-0.006578	-0.0018497
t=18	-6.91e-05	-0.0061231	-0.0017877
t=19	0.0015445	-0.0057163	-0.0017056
t=20	0.0023179	-0.0053382	-0.0016394
t=21	0.0029831	-0.005003	-0.0015531
t=22	0.0028224	-0.0046892	-0.0014687
t=23	0.0030632	-0.004406	-0.0014095
t=24	0.0030265	-0.004149	-0.0013428
t=25	0.003016	-0.0039129	-0.0012779
t=26	0.0028234	-0.0036931	-0.0012312
t=27	0.0028749	-0.0034928	-0.001174
t=28	0.002779	-0.0033088	-0.0011196
t=29	0.002625	-0.0031357	-0.001071
t=30	0.0025349	-0.0029759	-0.0010242
t=31	0.0024033	-0.0028262	-0.0009775
t=32	0.0022593	-0.0026889	-0.0009384
t=33	0.0021682	-0.0025597	-0.0008979
t=34	0.0020785	-0.0024376	-0.0008578
t=35	0.0019908	-0.0023246	-0.000824
t=36	0.0018916	-0.0022178	-0.0007854
t=37	0.0018024	-0.0021172	-0.000751
t=38	0.0017195	-0.0020223	-0.0007176
t=39	0.001647	-0.0019321	-0.0006871
t=40	0.0015621	-0.0018477	-0.0006566

Note: This figure shows the impulse response of the mean of log hours to various shocks that occur when t =10 for Model B.1. The diamond line reports the response to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line with triangles is the effect of an exogenous job change.

Return to Figure A6

Figure A7: Response of Cross-Sectional variance of the First Difference of Log Earnings to Various Shocks at t=10 - Model B.1
	unemployment shock	1SD 'w' shock	job change shock
t=2	1	1	1
t=3	1	1	1
t=4	1	1	1
t=5	1	1	1
t=6	1	1	1
t=7	1	1	1
t=8	1	1	1
t=9	1	1	1
t=10	0.8694952	0.9714931	1.328897
t=11	1.466354	0.9945283	1.022987
t=12	1.23326	0.9928479	1.016241
t=13	1.169135	0.9928505	1.011256
t=14	1.139694	0.9935359	1.010932
t=15	1.114018	0.9941651	1.00918
t=16	1.094014	0.9947633	1.008709
t=17	1.077525	0.9950341	1.006014
t=18	1.065193	0.9958141	1.00452
t=19	1.042992	0.9965768	1.003251
t=20	1.029076	0.9965797	1.004322
t=21	1.023773	0.9971874	1.003585
t=22	1.019811	0.9973874	1.003145
t=23	1.01486	0.9975362	1.002257
t=24	1.012921	0.9978126	1.00219
t=25	1.0106	0.9983408	1.002216
t=26	1.008147	0.9984843	1.000891
t=27	1.005931	0.9985859	1.001059
t=28	1.003831	0.9987199	1.000578
t=29	1.004109	0.9990811	1.001006
t=30	1.003279	0.9992052	1.000336
t=31	1.002843	0.999289	1.000823
t=32	1.001722	0.9994239	1.000113
t=33	1.001603	0.9995354	1.000328
t=34	1.001017	0.999629	1.000366
t=35	1.000901	0.9997412	1.000056
t=36	1.000731	0.9996842	1.000332
t=37	1.000876	0.9998609	1.000515
t=38	1.000492	0.9998245	1.000283
t=39	1.000375	0.9999354	1.000158
t=40	1.000314	0.9999443	1.000078

Note: This figure shows the behavior of the ratio of var(earnit - earni,t-1) following an exogenous shock at t = 10 to the baseline variance for model B.1. The diamond line reports the response of the ratio to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change.

Return to Figure A7

Figure A8: Response of Cross-Sectional variance of Log Earnings to Various Shocks at t=10 - Model B.1
	unemployment shock	1SD 'w' shock	job change shock
t=1	1	1	1
t=2	1	1	1
t=3	1	1	1
t=4	1	1	1
t=5	1	1	1
t=6	1	1	1
t=7	1	1	1
t=8	1	1	1
t=9	1	1	1
t=10	0.895839	0.9574797	1.036472
t=11	1.175763	0.9631809	1.032827
t=12	1.123148	0.9703097	1.030485
t=13	1.103551	0.9765139	1.029217
t=14	1.091215	0.981994	1.026283
t=15	1.085855	0.9879863	1.02655
t=16	1.076559	0.9919695	1.026164
t=17	1.070105	0.9949493	1.024724
t=18	1.059844	0.9972593	1.023119
t=19	1.050738	0.9998587	1.022248
t=20	1.047207	1.001635	1.021578
t=21	1.040486	1.003032	1.019439
t=22	1.037646	1.0043	1.018062
t=23	1.033402	1.005055	1.018213
t=24	1.028419	1.006539	1.016746
t=25	1.025318	1.006938	1.016021
t=26	1.021821	1.007043	1.01458
t=27	1.018731	1.00789	1.013623
t=28	1.017319	1.008474	1.013549
t=29	1.015456	1.008209	1.012779
t=30	1.014576	1.008251	1.012627
t=31	1.012349	1.008327	1.011634
t=32	1.011572	1.008184	1.011798
t=33	1.010338	1.008186	1.011001
t=34	1.009888	1.008493	1.010018
t=35	1.009358	1.007999	1.010605
t=36	1.009073	1.008157	1.0096
t=37	1.007758	1.007774	1.008655
t=38	1.007509	1.007913	1.008392
t=39	1.006315	1.007568	1.007472
t=40	1.006068	1.007197	1.007306

Note: This figure shows the behavior of the ratio of the cross-sectional variance of log earnings following an exogenous shock at t = 10 to the baseline variance for model B.1. The diamond line reports the response of the ratio to a one-standard-deviation shock to the error term in the autoregressive component of wages. The line with circles shows the effect of becoming unemployed. The line marked with "x" shows the average response to an exogenous job change.

Return to Figure A8

Figure B1: Decomposing the Wage-Experience Profile, SRC Sample. Whites with a High School Degree or Less
	E(v_j(t)\|t)	E(lnwage\|t)	E(Value of Tenure\|t)	hc(t)
t=1	-0.0001194	0	0	0.0001194
t=2	0.0020135	0.0776476	0.0157807	0.0598534
t=3	0.0042186	0.14996	0.0266831	0.1190582
t=4	0.0082046	0.2171376	0.0345592	0.1743739
t=5	0.0108021	0.2793808	0.0408035	0.2277752
t=6	0.0140406	0.33689	0.0460465	0.2768029
t=7	0.0175036	0.3898656	0.0508455	0.3215165
t=8	0.0198992	0.438508	0.0547533	0.3638555
t=9	0.0197964	0.4830176	0.0586439	0.4045773
t=10	0.0214941	0.5235948	0.0619862	0.4401145
t=11	0.0235347	0.56044	0.0650516	0.4718536
t=12	0.0255054	0.5937536	0.0677189	0.5005293
t=13	0.0274757	0.623736	0.0698101	0.5264502
t=14	0.0299871	0.6505876	0.0719021	0.5486985
t=15	0.0311723	0.6745088	0.0740231	0.5693134
t=16	0.0324159	0.6957	0.0754979	0.5877863
t=17	0.032421	0.7143616	0.0769906	0.6049501
t=18	0.0330675	0.730694	0.0783999	0.6192267
t=19	0.033295	0.7448976	0.0797303	0.6318723
t=20	0.0329417	0.7571728	0.0814032	0.6428279
t=21	0.0341431	0.76772	0.0828998	0.6506771
t=22	0.0347709	0.7767396	0.0848373	0.6571314
t=23	0.0357531	0.784432	0.08704	0.6616389
t=24	0.0350177	0.7909976	0.0892977	0.6666823
t=25	0.0364797	0.7966368	0.0918507	0.6683065
t=26	0.0371427	0.80155	0.0946006	0.6698066
t=27	0.0379969	0.8059376	0.09772	0.6702207
t=28	0.0384705	0.81	0.1011552	0.6703743
t=29	0.0386111	0.8139376	0.1048171	0.6705095
t=30	0.0398674	0.8179508	0.1089491	0.6691344
t=31	0.0404686	0.82224	0.113086	0.6686854
t=32	0.0399609	0.8270056	0.1175198	0.6695248
t=33	0.0407922	0.832448	0.1220065	0.6696493
t=34	0.0412226	0.8387676	0.1268023	0.6707426
t=35	0.0411975	0.8461648	0.1316528	0.6733145
t=36	0.0412373	0.85484	0.1364502	0.6771525
t=37	0.0410309	0.8649936	0.1412666	0.682696
t=38	0.04152	0.876826	0.1459832	0.6893228
t=39	0.0419839	0.8905376	0.1503133	0.6982405
t=40	0.0425341	0.9063288	0.1545776	0.7092171

Return to Figure B1

Figure B2: Decomposing the Wage-Experience Profile, SRC Sample, Whites, Some College or More.
	E(v_j(t)\|t)	E(lnwage\|t)	E(Value of Tenure\|t)	hc(t)
t=1	-0.0004594	0	0	0.0004594
t=2	0.0097698	0.077815	0.0217053	0.0463399
t=3	0.0176675	0.1508232	0.0379272	0.0952285
t=4	0.0263929	0.2191734	0.0498143	0.1429662
t=5	0.035144	0.2830144	0.0584512	0.1894192
t=6	0.043877	0.342495	0.0644257	0.2341923
t=7	0.0516981	0.397764	0.0688553	0.2772106
t=8	0.0578828	0.4489702	0.0717522	0.3193353
t=9	0.0634305	0.4962624	0.0740352	0.3587967
t=10	0.068328	0.5397894	0.0753192	0.3961421
t=11	0.0739596	0.5797	0.076334	0.4294063
t=12	0.0789554	0.616143	0.0770877	0.4600998
t=13	0.0867236	0.6492672	0.0773609	0.4851827
t=14	0.0915519	0.6792214	0.0774074	0.5102622
t=15	0.0961262	0.7061544	0.0780623	0.5319659
t=16	0.0992439	0.730215	0.0783651	0.552606
t=17	0.1021927	0.751552	0.0789021	0.5704572
t=18	0.1044644	0.7703142	0.0796226	0.5862272
t=19	0.1065374	0.7866504	0.0808066	0.5993064
t=20	0.1082533	0.8007094	0.0821375	0.6103187
t=21	0.1117858	0.81264	0.0840473	0.6168069
t=22	0.1153634	0.822591	0.0861509	0.6210768
t=23	0.1173029	0.8307112	0.0890718	0.6243365
t=24	0.1190082	0.8371494	0.0919939	0.6261473
t=25	0.1213735	0.8420544	0.0954773	0.6252036
t=26	0.1232488	0.845575	0.0992249	0.6231012
t=27	0.1250796	0.84786	0.1033984	0.6193819
t=28	0.1264705	0.8490582	0.1077135	0.6148742
t=29	0.1279785	0.8493184	0.1124456	0.6088943
t=30	0.1298072	0.8487894	0.1175706	0.6014116
t=31	0.131622	0.84762	0.1228136	0.5931844
t=32	0.1321082	0.845959	0.1282361	0.5856147
t=33	0.1332261	0.8439552	0.1335243	0.5772048
t=34	0.1336664	0.8417574	0.1389848	0.5691062
t=35	0.1340047	0.8395144	0.1442314	0.5612783
t=36	0.134511	0.837375	0.1492891	0.5535749
t=37	0.1347437	0.835488	0.1541174	0.5466269
t=38	0.1350312	0.8340022	0.158602	0.540369
t=39	0.1350385	0.8330664	0.1625971	0.5354308
t=40	0.1351375	0.8328294	0.1659962	0.5316957

Return to Figure B2