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Modelling Low Pay Transition Probabilities, Accounting for Panel Attrition, Non-Response, and Initial Conditions

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  • Lorenzo Cappellari
  • Stephen P. Jenkins

Abstract

We model annual low pay transition probabilities taking account of three potentially endogenous selections: two sample drop-out mechanisms (panel attrition, non-employment) and ‘initial conditions’ (base-year low pay status). This model, and variants that ignore one or more of these selection mechanisms, are fitted to data for men from the British Household Panel Survey. Tests of the ignorability of the endogenous selection mechanisms suggest that ‘economic’ selection mechanisms such as initial conditions and retention of employment are more important than the ‘survey’ selection mechanism (attrition). However, consistent with related US research, relatively simple models provide estimates of covariate effects that differ little from the estimates from the complicated models.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1232.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1232

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Keywords: transition probabilities; low pay; attrition; non-response; ignorability;

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References

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  1. Hausman, Jerry A & Wise, David A, 1979. "Attrition Bias in Experimental and Panel Data: The Gary Income Maintenance Experiment," Econometrica, Econometric Society, vol. 47(2), pages 455-73, March.
  2. Jeffrey E. Zabel, 1998. "An Analysis of Attrition in the Panel Study of Income Dynamics and the Survey of Income and Program Participation with an Application to a Model of Labor Market Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 479-506.
  3. Sean Becketti & William Gould & Lee Lillard & Finis Welch, 1985. "The Panel Study of Income Dynamics After Fourteen Years: An Evaluation," UCLA Economics Working Papers 361, UCLA Department of Economics.
  4. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  5. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December.
  6. James P. Ziliak & Thomas J. Kniesner, 1998. "The Importance of Sample Attrition in Life Cycle Labor Supply Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 507-530.
  7. repec:ese:iserwp:2002-08 is not listed on IDEAS
  8. Stewart, Mark B & Swaffield, Joanna K, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
  9. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
  10. Becketti, Sean, et al, 1988. "The Panel Study of Income Dynamics after Fourteen Years: An Evaluatio n," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 472-92, October.
  11. Lee A. Lillard & Constantijn W. A. Panis, 1998. "Panel Attrition from the Panel Study of Income Dynamics: Household Income, Marital Status, and Mortality," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 437-457.
  12. Ziliak, J.P. & Kniesner, T.J., 1996. "The Importance of Sample Attrition in Life Cycle Labor Supply," Discussion Paper 1996-46, Tilburg University, Center for Economic Research.
  13. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  14. Gerard J. van den Berg & Maarten Lindeboom, 1998. "Attrition in Panel Survey Data and the Estimation of Multi-State Labor Market Models," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 458-478.
  15. Lorenzo Cappellari & Stephen P. Jenkins, 2002. "Modelling Low Income Transitions," Discussion Papers of DIW Berlin 288, DIW Berlin, German Institute for Economic Research.
  16. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
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Citations

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Cited by:
  1. Jaud, Mélise & Cadot, Olivier & Suwa-Eisenmann, Akiko, 2010. "Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports," CEPREMAP Working Papers (Docweb) 1015, CEPREMAP.
  2. Mosthaf, Alexander & Schnabel, Claus & Stephani, Jens, 2010. "Low-Wage Careers: Are There Dead-End Firms and Dead-End Jobs?," IZA Discussion Papers 4696, Institute for the Study of Labor (IZA).
  3. Mosthaf, Alexander & Schank, Thorsten & Schnabel, Claus, 2009. "Low-Wage Employment versus Unemployment: Which One Provides Better Prospects for Women?," IZA Discussion Papers 4611, Institute for the Study of Labor (IZA).
  4. Wunder, Christoph & Riphahn, Regina T., 2011. "The dynamics of welfare entry and exit among natives and immigrants," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 49162, Verein für Socialpolitik / German Economic Association.
  5. Stephani, Jens, 2012. "Wage growth and career patterns of German low-wage workers," IAB Discussion Paper 201201, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  6. Uhlendorff, Arne, 2006. "From No Pay to Low Pay and Back Again? A Multi-State Model of Low Pay Dynamics," IZA Discussion Papers 2482, Institute for the Study of Labor (IZA).
  7. Jones, Melanie K. & Jones, Richard J. & Murphy, Philip D. & Sloane, Peter J., 2007. "A Persistence Model of the National Minimum Wage," IZA Discussion Papers 2595, Institute for the Study of Labor (IZA).
  8. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2006. "Modelling poverty by not modelling poverty: An application of a simultaneous hazards approach to the UK," CASE Papers case106, Centre for Analysis of Social Exclusion, LSE.

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