Household income dynamics in Europe before and after the Great Recession: A four-country analysis

In this paper, we provide evidence of reduced short-term income mobility in the aftermath of the 2008 recession using EU-SILC data for four European countries (France, Italy, Spain and UK). By combining descriptive evidence with econometric analysis, we find that the reduction in income mobility is the result of three related developments. First, a slower income convergence process compared to pre-recession years; second, higher probability of income immobility; and third, stronger state dependence together with an increased difficulty for households at the bottom of the income distribution to move upwards. Finally, our empirical strategy also allows us to gain some insight on the microeconomic drivers of income mobility. We find that high educational attainment and the presence of employed family members facilitate households' upward movements along the income ladder.