State dependence and wage dynamics: a heterogeneous Markov chain model for wage mobility in Austria

Andrea Weber

No D2-2, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: The behaviour of individual movements in the wage distribution over time can be described by a Markov process. To investigate wage mobility in terms of transitions between quintiles in the wage distribution we apply a mixed effects panel estimation method suggested by Honoré and Kyriazidou (2000). This method of mobility measurement is robust to data contamination like all methods that treat fractiles. Moreover it allows for the inclusion of exogenous variables that change over time. We apply the estimator to a set of individual data form the Austrian social security records and find that disregarding unobserved heterogeneity greatly underestimates wage mobility. Simulated earnings profiles show that women are less mobile than men and have a tendency to be stuck in the lower part of the wage distribution.

Keywords: Wage mobility; Markov process; fixed effects panel estimation (search for similar items in EconPapers)
JEL-codes: C23 C25 J31 J60 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: State Dependence and Wage Dynamics: A Heterogeneous Markov Chain Model for Wage Mobility in Austria (2002)
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