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Earnings Instability and Tenure

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  • Lorenzo Cappellari
  • Marco Leonardi

Abstract

We study the effect of tenure on earnings instability in Italy using two alternative estimation strategies. First we use a descriptive measure of earnings instability and fixed effects regressions. Second, we develop a formal model of earnings dynamics distinguishing permanent from transitory earnings, and exploit variation of tenure and instability over time and across birth cohorts in estimation. We use the two approaches also to evaluate earnings instability associated with temporary contracts (short-tenure contracts). Our results indicate that each year of tenure on the job reduces earnings instability on average by 11%. Workers on a temporary contract have an earnings instability up to 50% higher than workers on a permanent contract.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4145.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4145

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Keywords: earnings instability; earnings dynamics; tenure; temporary contracts; minimum distance estimation;

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References

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  1. Lorenzo Cappellari, 2002. "The dynamics and inequality of Italian male earnings: permanent changes or transitory fluctuations?," 10th International Conference on Panel Data, Berlin, July 5-6, 2002, International Conferences on Panel Data C2-2, International Conferences on Panel Data.
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  20. Mortensen, Dale T, 1988. "Wages, Separations, and Job Tenure: On-the-Job Specific Training or Matching?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(4), pages 445-71, October.
  21. Cappellari, Lorenzo, 2002. "Earnings dynamics and uncertainty in Italy: how do they differ between the private and public sectors?," Labour Economics, Elsevier, vol. 9(4), pages 477-496, September.
  22. Danielle Venn, 2011. "Earnings Volatility and its Consequences for Households," OECD Social, Employment and Migration Working Papers 125, OECD Publishing.
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Cited by:
  1. SOLOGON Denisa & VAN KERM Philippe, 2014. "Earnings dynamics, foreign workers and the stability of inequality trends in Luxembourg 1988-2009," CEPS/INSTEAD Working Paper Series 2014-03, CEPS/INSTEAD.
  2. Cervini-Plá, María & Ramos, Xavi, 2008. "Long Term Earnings Inequality, Earnings Instability and Temporary Employment in Spain: 1993–2000," IZA Discussion Papers 3538, Institute for the Study of Labor (IZA).
  3. Caterina Giannetti & Marianna Madia & Luigi Moretti, 2014. "Job insecurity and financial distress," Applied Financial Economics, Taylor & Francis Journals, vol. 24(4), pages 219-233, February.

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