From No Pay to Low Pay and Back Again? A Multi-State Model of Low Pay Dynamics

Arbeitspapier

This study analyzes the mobility between three labor market states: working in low paid jobs, working in higher paid jobs and not working. Using German panel data I estimate dynamic multinomial logit panel data models with random effects taking the initial conditions problem and potential endogeneity of panel attrition into account. In line with results from other countries, this first study on Germany finds true state dependence in low pay jobs and confirms previous results of state dependence in non-employment. Moreover, I find evidence for a \low pay no pay cycle", i.e. being low paid or not employed itself increases the probability of being in one of these states in the next year. However, compared to non working, being low paid does not have adverse effects on future employment prospects: the employment probability increases with low pay employment and the probability of being high paid seems to be higher for previously low paid workers. I find no evidence for endogenous panel attrition.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 648

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Wage Level and Structure; Wage Differentials ; Job, Occupational, and Intergenerational Mobility; Promotion ; Unemployment: Models, Duration, Incidence, and Job Search ; Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
• Subject: low pay dynamics ; unemployment dynamics ; dynamic random effects models ; state dependence ; panel attrition ; unobserved heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Uhlendorff, Arne
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/18541
• Last update: 14.03.2005, 11:52 AM CET