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Stochastic Expected Utility for Binary Choice: New Representations

Alexander Plum ()
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Alexander Plum: New Zealand Work Research Institute, Faculty of Business, Economics and Law, Auckland University of Technology

No 2018-08, Working Papers from Auckland University of Technology, Department of Economics

Abstract: Are low wages a way for the unemployed to switch to higher-paying jobs? Using data from the British Household Panel Survey (BHPS), the labour market dynamics of unemployed, low-paid, and higher-paid employed men are analysed. Moreover, the respective (un)employment duration and occupational skill level are accounted for. Results show that in general low wages significantly reduce the risk of future unemployment and increase the chances of ascending the salary ladder, especially in the case of long-term unemployment (>360 days). Furthermore, the occupational skill level has a substantial influence on the upward mobility of low-paid jobs: individuals working in the initial period in a low-paid and higher-skilled occupation have on average an 11 percentage points higher probability of entering higher pay compared to when working in a low-paid and low-skilled occupation.

Keywords: unemployment dynamics; low-pay dynamics; intial conditions problem; random-effects probit models; maximum simulated likelihood (search for similar items in EconPapers)
JEL-codes: J64 J62 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2018-08
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