We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but only approximate methods, we find that the transitory variance started to increase in the...

One strand of the literature in labor economics, household finance, and macroeconomics has studied whether individual earnings volatility has risen or fallen in the U.S. over the last several decades. There are disagreements in the empirical literature on this question, with some suggestions...