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Work Status Choice and the Distribution of Family Earnings.

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Analyses of the distribution of earnings are concerned normally with the measurement and explanation of observed inequality in the personal earnings of individuals. Such analyses often seek to analyse the returns to human capital as measured by age and experience while using other individual characteristics as control variables. The paper is divided into six sections. The first section describes features of the data upon which the analysis is based. Section II estimates the rates of return of education in the Becker-Mincer human capital framework and notes the unusually low rates for self-employment. As a consequence of this differential effect of education in the two employment status categories, work status choice is treated as and endogenous variable in the study of earnings behavior in Section III. Section IV considers family earnings variations across work status choice and shows that employed families reveal more widely dispersed earnings than families where the head of household is self-employed. At lower levels of income however, the opposite holds self-employed family earnings are more dispersed. Section V treats the question of multiple-earner households. Correlations in potential earnings within a household are shown to be larger than correlations in observed earning the corrected dispersion in the distribution of family earnings would therefore be larger than observed. Section VI examines the relationships among family wealth, family structure, and the probability of finding a secondary earner in a household.

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  • Economics and Cost Analysis
  • Sociology and Law

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