State Dependence and Wage Dynamics: A Heterogeneous Markov Chain Model for Wage Mobility in Austria
AbstractThe 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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Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 114.
Length: 23 pages
Date of creation: Apr 2002
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Other versions of this item:
- Andrea Weber, 2002. "State dependence and wage dynamics: a heterogeneous Markov chain model for wage mobility in Austria," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D2-2, International Conferences on Panel Data.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- 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
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