Advanced Search
MyIDEAS: Login to save this paper or follow this series

Shaping earnings instability: labour market policy and institutional factors

Contents:

Author Info

  • Denisa Maria Sologon

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

  • O'Donoghue, Cathal

    (Teagasc, NUI, Ireland)

Abstract

The concerns regarding the economic insecurity stemming from earnings instability have been gaining momentum in the contemporary political discourse. If earnings instability is as a proxy for risk, for risk-averse individuals, increasing earnings instability bears substantial welfare costs. Using the variance of transitory earnings estimated using the European Community Household Panel (ECHP) and the OECD labour market indicators, we explore by means of non-linear least squares the relationship between earnings instability and labour market policies/institutions across Europe in the 1990s. We find of a complex system of interactions within the institutional framework affecting earnings instability. For an average country with a low corporatism, we find a U-shape relationship between earnings instability and the strictness of labour market regulation. Corporatist systems have a lower earnings instability than decentralized economies, they are effective in reducing the adverse effects of macroeconomic shocks on earnings instability, and can counteract the increase in earnings instability associated with the development of ALMPs, with unionization, with product market regulation and with the tax wedge. The earnings instability associated with developed ALMPs is reduced by regulated labour markets, a high corporatism, low non-wage labour costs and high unemployment benet replacement rates (UBRR). The decrease in earnings instability associated with an increase in the UBRR is the largest for developed ALMPs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.merit.unu.edu/publications/wppdf/2011/wp2011-077.pdf
Download Restriction: no

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 077.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:unm:unumer:2011077

Contact details of provider:
Postal: P.O. Box 616, 6200 MD Maastricht
Phone: (31) (0)43 3883875
Fax: (31) (0)43 3216518
Web page: http://www.merit.unu.edu/
More information through EDIRC

Related research

Keywords: economic insecurity; earnings instability; labour market institutions; labour market policies;

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-54, March.
  2. Gottschalk, Peter & Spolaore, Enricco, 2002. "On the Evaluation of Economic Mobility," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 191-208, January.
  3. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
  4. Rudiger Ahrend & Jens Arnold & Charlotte Moeser, 2011. "The Sharing of Macroeconomic Risk: Who Loses (and Gains) from Macroeconomic Shocks," OECD Economics Department Working Papers 877, OECD Publishing.
  5. Teulings,Coen & Hartog,Joop, 1998. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521590730, April.
  6. Kalwij, Adriaan & Alessie, Rob, 2003. "Permanent and Transitory Wage Inequality of British Men, 1975-2001: Year, Age and Cohort Effects," IZA Discussion Papers 686, Institute for the Study of Labor (IZA).
  7. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
  8. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  9. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  10. Satya Chakravarty, 2001. "The Variance as a subgroup decomposable measure of inequality," Social Indicators Research, Springer, vol. 53(1), pages 79-95, January.
  11. Luis Ayala & Carolina Navarro & Mercedes Sastre, 2006. "Cross-Country Income Mobility Comparisons Under Panel Attrition: The Relevance of Weighting Schemes," Working Papers 47, ECINEQ, Society for the Study of Economic Inequality.
  12. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  13. 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.
  14. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
  15. Andrea Bassanini & Romain Duval, 2006. "The determinants of unemployment across OECD countries: Reassessing the role of policies and institutions," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 7-86.
  16. Xavier Ramos, 2003. "The Covariance Structure of Earnings in Great Britain, 1991-1999," Economica, London School of Economics and Political Science, vol. 70(278), pages 353-374, 05.
  17. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
  18. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  19. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, September.
  20. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  21. Milton Friedman & Simon Kuznets, 1954. "The Data on Income from Independent Professional Practice," NBER Chapters, in: Income from Independent Professional Practice, pages 46-62 National Bureau of Economic Research, Inc.
  22. Denisa Maria Sologon & Cathal O’Donoghue, 2011. "Shaping Earnings Mobility: Policy and Institutional Factors," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(2), pages 175-202, December.
  23. William Milberg & Deborah Winkler, 2009. "Globalization, Offshoring and Economic Insecurity in Industrialized Countries," Working Papers 87, United Nations, Department of Economics and Social Affairs.
  24. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers W97/15, Institute for Fiscal Studies.
  25. SOLOGON Denisa & O?DONOGHUE Cathal, 2010. "Earnings dynamics and inequality in the EU, 1994-2001," CEPS/INSTEAD Working Paper Series 2010-34, CEPS/INSTEAD.
  26. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, June.
  27. Dickens, Richard, 2000. "The Evolution of Individual Male Earnings in Great Britain: 1975-95," Economic Journal, Royal Economic Society, vol. 110(460), pages 27-49, January.
  28. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-62, December.
  29. Creedy, J., 1995. "Income Mobility, Ineqality and Social Welfare," Department of Economics - Working Papers Series 479, The University of Melbourne.
  30. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March.
  31. Dickens, Richard, 2000. "Caught in a Trap? Wage Mobility in Great Britain: 1975-1994," Economica, London School of Economics and Political Science, vol. 67(268), pages 477-97, November.
  32. SOLOGON Denisa & O?DONOGHUE Cathal, 2011. "Shaping persistent earnings inequality: labour market policy and institutional factors," CEPS/INSTEAD Working Paper Series 2011-22, CEPS/INSTEAD.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2011077. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ad Notten).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.