IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Earnings Dynamics and Inequality among Men across 14 EU Countries, 1994-2001: Evidence from ECHP

  • Sologon, Denisa Maria

    ()

    (LISER (CEPS/INSTEAD))

  • O'Donoghue, Cathal

    ()

    (Teagasc Rural Economy Research Centre)

This paper analyses the dynamic structure of individual earnings across 14 EU countries over the period 1994-2001 using ECHP. Understanding wage mobility and its link with the evolution of cross-sectional earnings inequality is important from a welfare perspective, particularly given the large variety in national cross-sectional wage inequality. This is highly relevant in the context of the changes that took place in the EU labour market policy framework after 1995 under the incidence of the 1994 OECD Jobs Strategy, which recommend policies to increase wage flexibility, lower non-wage labour costs and allow relative wages to better reflect individual differences in productivity and local labour market conditions. What is the source of earnings variation? Did the increase in cross-sectional wage inequality observed in some countries result from greater transitory fluctuations in earnings and individuals facing a higher degree of earnings mobility? Or is this rise reflecting increasing permanent differences between individuals with mobility remaining constant or even falling? Are there common trends in earnings inequality and mobility across countries? Equally weighted minimum distance methods are used to estimate the covariance structure of earnings, decompose earnings into a permanent and a transitory component and conclude about their evolution. As expected, a notable change was an increased country heterogeneity, which translated itself in the level and evolution of the cross-sectional earnings inequality components. The decrease in cross-sectional inequality was accompanied by an increase in mobility, and therefore a decrease in the importance of the permanent component relative to the transitory component in Denmark, Belgium and Spain, and by a decrease in earnings mobility in Germany, France, UK, Ireland and Austria. In Luxembourg, Italy, Greece, Portugal, and Finland, the increase in cross-sectional inequality was accompanied by a decrease in mobility, whereas in Netherlands by an increase.

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://ftp.iza.org/dp4012.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4012.

as
in new window

Length: 60 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4012
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


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. Dew-Becker, Ian & Gordon, Robert J, 2008. "The Role of Labour Market Changes in the Slowdown of European Productivity Growth," CEPR Discussion Papers 6722, C.E.P.R. Discussion Papers.
  2. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, December.
  3. 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.
  4. 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.
  5. Todd E. Clark, 1995. "Small sample properties of estimators of non-linear models of covariance structure," Research Working Paper 95-01, Federal Reserve Bank of Kansas City.
  6. 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.
  7. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  8. 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.
  9. 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.
  10. repec:use:tkiwps:044 is not listed on IDEAS
  11. 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.
  12. Robert A. Moffitt & Peter Gottschalk, 1995. "Trends in the Variances of Permanent and Transitory Earnings in the U.S. and Their Relation to Earnings Mobility," Boston College Working Papers in Economics 444, Boston College Department of Economics, revised 01 Nov 1998.
  13. 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.
  14. Hause, John C, 1980. "The Fine Structure of Earnings and the On-the-Job Training Hypothesis," Econometrica, Econometric Society, vol. 48(4), pages 1013-29, May.
  15. 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.
  16. R. Alessie & A.S. Kalwij, 2003. "Permanent and transitory wage inequality of British men, 1975-2001: year, age and cohort effects," Working Papers 03-04, Utrecht School of Economics.
  17. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  18. Edward E. Leamer, 1982. "Let's Take the Con Out of Econometrics," UCLA Economics Working Papers 239, UCLA Department of Economics.
  19. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
  20. 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).
  21. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4012. 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: (Mark Fallak)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.