ABSTRACT
This chapter describes the aspects of earnings together in one definition referred to as "piece rates". It describes the datasets used in the analysis. While self-employment incomes can be identified, the focus of the chapter is on employee income. The chapter identifies a number of objectives for earnings modules in dynamic microsimulation models that simulated earnings should reflect. It illustrates a range of issues that affect the objectives. The chapter estimates different panel data econometric models to assess the impact of the characteristics detailed in. It looks at the methods applied in econometric models of earnings, how these methods are applied to dynamic microsimulation models, before investigating theoretical aspects of earnings. The chapter presents the earnings equations that draw upon Becker's Human Capital model, which determines that logged earnings depend upon schooling, experience and other factors and unobserved variation.
