Fluctuations In Individual Labor Income: A Panel VAR Analysis

This paper studies variation in individual labor income over time using a panel vector autoregression (PVAR) in income, the wage rate, hours of work, and hours of unemployment. The framework is used to investigate how much of the residual variation in labor income is due to residual variation in the wage rate, work hours, and unemployment hours. The author also explores the dynamic effects of unanticipated changes in each of the variables in the system, investigate their interactions, and assess their contribution to short-run and long-run income movements.