Essays on earnings mobility within and across generations using copula

In Chapter 1, I study the effect of labor income mobility on lifetime inequality in the United States and Germany. I estimate models of labor income dynamics using PSID and GSOEP, and then simulate the lifetime income distribution. I use a flexible copula approach in which I extend the existing copula models to allow for a more general form of individual unobserved heterogeneity and to allow for a second order Markov transitory component. I find that these extensions improve the fit of the copula model and change the conclusions that can be drawn.;My results from Chapter 1 show that, when using a flexible copula-form individual heterogeneity, the rise in mobility in the 90's in the United States can compensate for the increase in cross-sectional inequality, leading to a similar lifetime inequality across the 80's and 90's, which is not found in the more traditional specifications. On the other hand, Germany experienced a slight decrease in mobility over the same period, and thus an increase in both lifetime and cross-sectional inequality. My results also show that, despite a higher mobility, the lifetime income inequality in the United States is still much higher than that in Germany.;In Chapter 2, I study the degree of intergenerational mobility in the United States and Germany. The traditional method of assessing intergenerational mobility---using the average income over a few years for each generation---is subject to two kinds of bias: attenuation bias due to measurement error and lifecyle biases. In Chapter 2, I use a dynamic copula model of earnings, which explicitly takes into account the fact that the observed earnings are subject to transitory shocks that can be persistent. The model also allows for variations over the lifecycle in various dimensions to deal with the lifecycle bias. Therefore, my model is able to adjust for the above two kinds of bias. Moreover, I adopt a copula approach so that it provides a more flexible model by allowing for asymmetry in the dynamics and intergenerational dependence.;Using PSID data from the United States and GSOEP data from Germany, I find that the traditional method is substantially biased downward. The intergenerational elasticity is 0.52 in the United States and 0.39 for Germany, which are about 0.1 higher than the results obtained from more traditional method using the same sample data. I have also found substantial asymmetry in the earnings relations between generations. There is a substantially higher elasticity in lifetime earnings for sons with fathers at the top lifetime earnings quantiles than those with fathers at lower quantiles. The increase in inequality over time also increases the intergenerational elasticity if the intergenerational earnings transmission is stable in terms of rank.