What explains the decline in wage mobility in the German low-wage sector?

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

No 12-041, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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. Next to compositional shifts of the low-wage sector relative to the high-wage sector, this trend may be explained by an increase in genuinestate dependence, which occurs if low-wage employment today causes lowwage employment in the future for reasons of, e.g., stigmatization or human capital depreciation. To isolate the latter, we model low-pay transitions by estimating a series of multivariate probit models. We address the initial conditions problem and the endogeneity of earnings attrition in our estimation approach by accounting for the selection into low-wage employment and earnings retention. Our findings for men and women point to an upward trend of genuine state dependence among low paid workers especially since the beginning of the 1990s. Using decomposition techniques, we show that between 35 and 54 per cent of the increase in genuine state dependence during the 1990s is accounted for by compositional effects.

Keywords: Wage Mobility; Trivariate Probit; Administrative Data (search for similar items in EconPapers)
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 (10)

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Related works:
Working Paper: What Explains the Decline in Wage Mobility in the German Low-Wage Sector? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12041

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