Persistent or Temporary Inequality? The role of working time
By using the longitudinal data from INPS (National Social Security Institute) it is possible to look beyond the mere changes in the cross-sectional inequality and to give some other explanations of the changes in earnings inequality over time. The main aim of this paper is indeed to investigate the earnings dynamics in Italy for the period 1992-2002 decomposing the earnings inequality into its persistent and transitory parts. The first one is mainly related to changes in returns to individuals’ unobservable ability while the second one reflects mostly year to year fluctuations often related to market instability. The analysis focuses on earnings dynamics of male and female employees aged between 25 and 54. Furthermore, it takes into account the potential role of the working time (i.e. yearly working weeks) on the evolution of permanent and transitory earnings inequality.