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State Dependence and Wage Dynamics: A Heterogeneous Markov Chain Model for Wage Mobility in Austria

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Author Info
Weber, Andrea (Department of Economics and Finance, Institute for Advanced Studies, Vienna)

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Abstract

The behaviour of individual movements in the wage distribution over time can be described by a Markov process. To investigate wage mobility in terms of transitions between quintiles in the wage distribution we apply a fixed effects panel estimation method suggested by Honorè and Kyriazidou (2000). This method of mobility measurement is robust to data contamination like all methods that treat fractiles. Moreover it allows for the inclusion of exogenous variables that change over time. We apply the estimator to a set of individual data form the Austrian social security records and find that disregarding unobserved heterogeneity greatly underestimates wage mobility. Simulated earnings profiles show that women are less mobile than men and have a tendency to be stuck in the lower part of the wage distribution.

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File URL: http://www.ihs.ac.at/publications/eco/es-114.pdf
File Format: application/pdf
File Function: First version, 2002
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 114.

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Length: 23 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:ihs:ihsesp:114

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Postal: Stumpergasse 56, A-1060 Vienna, Austria
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Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria

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Related research
Keywords: Wage mobility; Markov process; Fixed effects panel estimation;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September. [Downloadable!] (restricted)
  2. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August. [Downloadable!] (restricted)
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  3. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  4. Magnac, Thierry, 2000. "Subsidised Training and Youth Employment: Distinguishing Unobserved Heterogeneity from State Dependence in Labour Market Histories," Economic Journal, Royal Economic Society, vol. 110(466), pages 805-37, October. [Downloadable!] (restricted)
  5. Fields, Gary S. & Ok, Efe A., 1996. "The Measurement of Income Mobility: An Introduction to the Literature," Working Papers 96-05, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  6. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Biewen, Martin, 2004. "Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition?," IZA Discussion Papers 1138, Institute for the Study of Labor (IZA). [Downloadable!]
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