Decomposing the Variance of Wages
| Actual Variance | Predicted Variance | Residual Variance | Counterfactual Predicted Wage Variance | |||||
|---|---|---|---|---|---|---|---|---|
| 1986 (1) | 2008 (2) | 1986 (3) | 2008 (4) | 1986 (5) | 2008 (6) | (7) | (8) | |
| Total | 0.0496 | 0.0727 | ||||||
| Between firms | 0.0170 | 0.0305 | 0.0096 | 0.0156 | 0.0074 | 0.0149 | 0.0127 | 0.0119 |
| Within firms | 0.0326 | 0.0423 | 0.0039 | 0.0032 | 0.0287 | 0.0391 | 0.0035 | 0.0036 |
| Gradients | 1986 | 2008 | 1986 | 2008 | ||||
| Sorting | 1986 | 2008 | 2008 | 1986 | ||||
Notes: Wage variance decompositions as described in Section VI of the paper. The variance components in Columns 3–4 and 7–8 are constructed using the 1986 or 2008 skill gradients or sorting patterns as indicated.