The Evolution of Wage Mobility in the German Low-Wage Sector - Is There Evidence for Increasing State Dependence?

Bodo Aretz and Nicole Gürtzgen
Authors registered in the RePEc Author Service: Nicole Guertzgen ()

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: In this paper, we study how wage mobility in the low-wage sector has changed in Western Germany between 1984 and 2004. Using German individual register data, we document a clear upward trend in the persistence of low-wage employment for both men and women. To explore whether the observed rise in persistence is accounted for by an increase in "genuine" state dependence or by compositional shifts of the low-wage sector, we model low-pay transitions by estimating a series of multivariate probit models. To address the initial conditions problem and the endogeneity of earnings attrition, our estimation approach accounts for the selection into low-wage employment and earnings retention. Using the estimates from the transition model, we determine the evolution of genuine state dependence which is defi ned as the average diff erence in low-pay transition probabilities conditional on being initially low and high paid, respectively. For men, our findings strongly argue against an upward trend of genuine state dependence, as the latter exhibits a fairly stationary development. This contrasts with women, whose evolution of genuine state dependence displays a slight upward trend.

JEL-codes: C23 J31 L13 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc12:62049

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