State Dependence and Wage Dynamics: A Heterogeneous Markov Chain Model for Wage Mobility in Austria

Weber, Andrea (April 2002) State Dependence and Wage Dynamics: A Heterogeneous Markov Chain Model for Wage Mobility in Austria. IHS Economics Series 114

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Abstract or Table of Contents

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 fixed effects panel estimation method suggested by Honorè 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.;

Item Type: IHS Series
Keywords: 'Wage mobility' 'Markov process' 'Fixed effects panel estimation'
Classification Codes (e.g. JEL): C23, C25, J31, J60
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 22 Jul 2017 01:00
URI: http://irihs.ihs.ac.at/id/eprint/1416

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