Exploring Shorrocks Mobility Indices Using European Data

Starting from the approach proposed by Schluter and Trede (2003) we develop a continuous and alternative measure of mobility which first, allows to identify mobility over different parts of the earnings distribution and second, to distinguish between mobility that tends to reduce or increase the level of permanent inequality. This paper focuses on four European countries, Denmark, Germany, Spain and the UK. In a global perspective, mobility in the short and long-run analysis tends to equalize the level of permanent inequality. Six year changes comparing the average between 1994 and 1995 with the average of 2000 and 2001, suggests that Denmark has the highest mobility mainly almost entirely from higher mobility at the middle and top of the distribution. Germany has the lowest overall mobility. Overall mobility over six years produces only a modest reduction in inequality patterns (5 to 10%) adopting the Gini index and there is no clear correlation between mobility and inequality levels. Exploiting the decomposability of the mobility index developed, we carry out a local analysis by earnings quintiles which draw some general key facts. It emerges that it is the bottom 20 percent of the earnings distribution that makes the largest contribution to the global mobility pattern and that mobility, with the exception of Denmark, does not lead to clear convergence to the mean but at points around 0.7-0.8 and 1.5 to 2 times the mean.