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Earnings Mobility Among Italian Low Paid Workers

  • Cappellari, Lorenzo

    ()

    (Università Cattolica del Sacro Cuore)

This paper uses Italian panel data to analyse transition probabilities at the bottom of the earnings distribution during the 1990s. The analytical framework is characterised by the ability to account for the endogeneity of initial conditions, educational attainment and earnings attrition, providing a model that encompasses those applied by previous research. Results show that the three selection mechanisms are endogenous for the estimation of low pay transitions. The data also reveal considerable state dependence, i.e. the experience of low pay is found to raise, per se, the probability of subsequent low pay episodes. Low pay persistence and entry rates are found to be larger among female employees, the low educated, manual workers in small firms and workers from the South relative to otherwise comparable individuals.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1068.

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Length: 34 pages
Date of creation: Mar 2004
Date of revision:
Publication status: published in: Journal of Population Economics, 2007, 20 (3), 465-482
Handle: RePEc:iza:izadps:dp1068
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  1. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  2. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
  3. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
  4. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  5. Stewart, M.B. & Swaffield, J.K., 1997. "Low Pay Dynamics and Transition Probabilities," The Warwick Economics Research Paper Series (TWERPS) 495, University of Warwick, Department of Economics.
  6. Cappellari, Lorenzo, 2002. " Do the 'Working Poor' Stay Poor? An Analysis of Low Pay Transitions in Italy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 87-110, May.
  7. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  8. Stephen P. Jenkins, 2000. "Modelling household income dynamics," Journal of Population Economics, Springer, vol. 13(4), pages 529-567.
  9. Moshe Buchinsky & Jennifer Hunt, 1996. "Wage Mobility in the United States," NBER Working Papers 5455, National Bureau of Economic Research, Inc.
  10. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
  11. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  12. Lorenzo Cappellari, 1999. "Low-Wage Mobility in the Italian Labour Market," The Warwick Economics Research Paper Series (TWERPS) 531, University of Warwick, Department of Economics.
  13. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  14. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
  15. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
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