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Equalizing or Disequalizing Lifetime Earnings Differentials?: Earnings Mobility in the EU: 1994-2001

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  • Denisa Maria Sologon
  • Cathal O'Donoghue

Abstract

Do EU citizens have an increased opportunity to improve their position in the distribution of lifetime earnings? To what extent does earnings mobility work to equalize/disequalize longerterm earnings relative to cross-sectional inequality and how does it differ across the EU? Our basic assumption is that mobility measured over a horizon of 8 years is a good proxy for lifetime mobility. We used the Shorrocks (1978) and the Fields (2008) index. Moreover, we explored the impact of differentials attrition on the two indices. The Fields index is affected to a larger extent by differential attrition than the Shorrocks index, but the overall conclusions are not altered. Based on the Shorrocks (1978) index men across EU have an increasing mobility in the distribution of lifetime earnings as they advance in their career. Based on the Fields index (2008) the equalizing impact of mobility increases over the lifetime in all countries, except Portugal, where it turns negative for long horizons. Thus, Portugal is the only country where mobility acts as a disequalizer of lifetime differentials. The highest lifetime mobility is recorded in Denmark, followed by UK, Belgium, Greece, Ireland, Netherlands, Italy, France, Spain, Germany, and the lowest, Portugal. The highest mobility as equalizer of longer term inequality is recorded in Ireland and Denmark, followed by France and Belgium with similar values, then UK, Greece, Netherlands, Germany, Spain and Italy.

Suggested Citation

  • Denisa Maria Sologon & Cathal O'Donoghue, 2009. "Equalizing or Disequalizing Lifetime Earnings Differentials?: Earnings Mobility in the EU: 1994-2001," SOEPpapers on Multidisciplinary Panel Data Research 251, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp251
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    References listed on IDEAS

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    1. R. Bénabou & E. Ok, 2000. "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Princeton Economic Theory Papers 00f1, Economics Department, Princeton University.
    2. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    3. Aaberge, Rolf, et al, 2002. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 443-469, December.
    4. 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).
    5. Hofer, Helmut & Weber, Andrea, 2002. "Wage mobility in Austria 1986-1996," Labour Economics, Elsevier, vol. 9(4), pages 563-577, September.
    6. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, January.
    7. 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.
    8. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
    9. Hause, John C, 1980. "The Fine Structure of Earnings and the On-the-Job Training Hypothesis," Econometrica, Econometric Society, vol. 48(4), pages 1013-1029, May.
    10. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, January.
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    12. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    13. John Creedy, 1998. "The Dynamics of Inequality and Poverty," Books, Edward Elgar Publishing, number 1484, April.
    14. Jarvis, Sarah & Jenkins, Stephen P, 1998. "How Much Income Mobility Is There in Britain?," Economic Journal, Royal Economic Society, vol. 108(447), pages 428-443, March.
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    Cited by:

    1. Ronald Bachmann & Peggy Bechara & Sandra Schaffner, 2012. "Wage Inequality and Wage Mobility in Europe," Ruhr Economic Papers 0386, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Ronald Bachmann & Peggy Bechara & Sandra Schaffner, 2016. "Wage Inequality and Wage Mobility in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 181-197, March.
    3. Aysit Tansel & Basak Dalgic & Aytekin Güven, 2014. "Wage Inequality and Wage Mobility in Turkey," ERC Working Papers 1414, ERC - Economic Research Center, Middle East Technical University, revised Nov 2014.
    4. Heshmati, Almas & Kim, Jungsuk, 2014. "A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth," IZA Discussion Papers 8119, Institute for the Study of Labor (IZA).
    5. repec:zbw:rwirep:0386 is not listed on IDEAS
    6. Sologon, Denisa Maria & O'Donoghue, Cathal, 2010. "Earnings Dynamics and Inequality among Men in Luxembourg, 1988-2004: Evidence from Administrative Data," IZA Discussion Papers 5014, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    panel data; wage distribution; inequality; mobility;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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