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Earnings Mobility in Europe: 1994-2001 : Do more flexible labour markets experience a higher earnings mobility?

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  • Denisa Maria Sologon

    ()
    (UNU-MERIT/MGSoG, Maastricht University, CEPS/INSTEAD Luxemburg, and IZA Germany)

  • O'Donoghue, Cathal

    (Teagasc, NUI, Ireland)

Abstract

The economic reality of the 1990s in Europe forced the labour markets to become more flexible. Using a consistent comparative dataset for 14 European countries, the European Community Household Panel (ECHP), we explore the evolution and the cross-national differences in earnings mobility across Europe between 1994 and 2001 from three angles: first, the evolution of short-term inequality and its link with cross-sectional inequality; second, the evolution of long-term mobility relative to short-term mobility and the implications for long-term inequality; third, we try to understand the cross-national differences in earnings mobility across Europe by exploring the cross-country heterogeneity in labour market policies/institutions. We explore the rank mobility and mobility as an equalizer of longer-term earnings. We find evidence supporting a negative association between the evolution of earnings inequality and earnings mobility. More flexible labour markets, with low levels of regulation and with a high labour market support are found to have higher earnings mobility. Similarly, unionization and corporatism are positively associated with earnings mobility. The "Flexicurity" countries (Denmark and Finland) have among the highest earnings mobility levels in Europe, close to the Anglo-Saxon countries (Ireland and the UK), whereas the Mediterranean countries with a strict regulation and a low labour market support have the lowest mobility. Portugal is the only country with disequalizing mobility in a long-term perspective

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 070.

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Date of creation: 2011
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Handle: RePEc:unm:unumer:2011070

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Keywords: earnings mobility; inequality; distributional change; labour market policies and institutions;

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References

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  1. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
  2. Greg J. Duncan & James N. Morgan, 1981. "Sense of Efficacy and Subsequent Change in Earnings-A Replication," Journal of Human Resources, University of Wisconsin Press, vol. 16(4), pages 649-657.
  3. Steven J. Haider, 2000. "Earnings Instability and Earnings Inequality of Males in the United States: 1967-1991," Working Papers 00-15, RAND Corporation Publications Department.
  4. Peter Gottschalk & Enrico Spolaore, 2002. "On the Evaluation of Economic Mobility," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 191-208.
  5. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
  6. Sologon, Denisa Maria & O'Donoghue, Cathal, 2009. "Increased Opportunity to Move Up the Economic Ladder? Earnings Mobility in EU: 1994-2001," IZA Discussion Papers 4311, Institute for the Study of Labor (IZA).
  7. R. Bénabou & E. Ok, . "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Princeton Economic Theory Papers 00f1, Economics Department, Princeton University.
  8. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
  9. Hofer, Helmut & Weber, Andrea, 2001. "Wage Mobility in Austria 1986-1996," Economics Series 108, Institute for Advanced Studies.
  10. Paul Gregg & Claudia Vittori, 2008. "Exploring Shorrocks Mobility Indices Using European Data," The Centre for Market and Public Organisation 08/206, Department of Economics, University of Bristol, UK.
  11. SOLOGON Denisa & O?DONOGHUE Cathal, 2010. "Earnings dynamics and inequality in the EU, 1994-2001," CEPS/INSTEAD Working Paper Series 2010-34, CEPS/INSTEAD.
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