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Wage Persistence and Labour Market Institutions: An Analysis of Young European Workers

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  • Menezes, Antonio

    () (University of the Azores)

  • Sciulli, Dario

    () (University of Rome Tor Vergata)

  • Vieira, José António Cabral

    () (University of the Azores)

Abstract

This paper investigates the effects of labour market institutions on wage persistence among young European workers at the beginning of their careers. We use ECHP data from 1995 to 2001 for 13 EU countries and estimate a three-level random intercept probit model that allows for unobserved heterogeneity both at the individual and country level. Overall, we find that labour market institutions explain wage persistence. In particular, we find that a high level of employment protection legislation and a high level of bargaining centralization increase wage persistence.

Suggested Citation

  • Menezes, Antonio & Sciulli, Dario & Vieira, José António Cabral, 2007. "Wage Persistence and Labour Market Institutions: An Analysis of Young European Workers," IZA Discussion Papers 2627, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2627
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    References listed on IDEAS

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    1. 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.
    2. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August.
    3. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
    4. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2004. "GLLAMM Manual," U.C. Berkeley Division of Biostatistics Working Paper Series 1160, Berkeley Electronic Press.
    5. Parker, Simon C. & Gardner, Sam, 2002. "International income mobility," Economics Letters, Elsevier, vol. 76(2), pages 179-187, July.
    6. José Cabral Vieira, 2005. "Low-wage mobility in the Portuguese labour market," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 4(1), pages 1-14, April.
    7. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
    8. Cardoso, Ana Rute, 2006. "Wage mobility: do institutions make a difference?," Labour Economics, Elsevier, vol. 13(3), pages 387-404, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    labour market institutions; unobserved heterogeneity; wage persistence;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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