Flexicurity, wage dynamics and inequality over the life-cycle

We investigate the relationship between life-cycle wages and flexicurity in Denmark. We separate permanent from transitory wages and characterise flexicurity using membership of unemployment insurance funds. We find that flexicurity is associated with lower wage growth heterogeneity over the life-cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance membership, robustness checks suggest that moral hazard is the relevant interpretation.Unemployment insurance, wage dynamics, wage inequality, wage instability.

The dynamics and inequality of Italian male earnings: permanent changes or transitory fluctuations?

This paper looks at longitudinal aspects of changes in Italian male earnings inequality since the late 1970s by decomposing the earnings autocovariance structure into its persistent and transitory parts. Cross-sectional earnings differentials are found to grow over the period. The longitudinal analysis shows that such growth is determined by the permanent earnings component and is due both to a divergence of earnings profiles over the working career and an increase in overall persistence during the first half of the 1990s. Using these estimates to analyse low pay probabilities shows that it became more persistent for all birth cohorts; consequently, the probability of repeated low pay episodes also increased during the sample period. When allowing for occupation-specific components in the parameters of interest, life time earnings divergence is found to characterise the non-manual earnings distribution.Earnings Inequality, Earnings Dynamics, Minimum Distance Estimation

Low-Wage Mobility in the Italian Labour Market

This paper uses SHIW panel data for 1993 and 1995 to model individual transition probabilities at the bottom of the Italian wage distribution. The analysis is based on a bivariate probit model with endogenous switching which allows tackling the initial conditions problem, i.e. the potential endogeneity of the conditioning starting state. Results show the appropriateness of such a choice : the correlation between state and transition probabilities is significantly different from zero, while overlooking endogeneity leads to overstatement of both size and significance of coefficients in the transition equation. The paper shows that while some factors such as education, sex and geographical location have an effect on low-pay persistence, job related variables are more effective in avoiding falls into low-pay from higher pay. It is also shown how raw persistence involves a considerable share of true state dependence, pointing towards the existence of low-pay stigma.low-pay ; wage mobility ; initial conditions problem

Friends’ Networks and Job Finding Rates

We investigate the effect of social interactions on labor market outcomes using a direct measure of social contacts based on information about individuals’ three best friends and their characteristics. We examine the effect of the number of employed friends on the transition from non-employment to employment, and we find the existence of significant network effects at the individual level. An additional employed friend increases the probability of finding a job by 3.7 percentage points. This finding is robust to specifications that address the endogeneity of friends’ employment status, which may be induced by correlation with unobserved individual attributes and feedback effects. Considering labor market outcomes, we find evidence of higher wages and employment stability for those with more employed friends, which is consistent with networks acting as an information transmission mechanism.Networks, Unemployment, Friendship ties.

Friends' Networks and Job Finding Rates

We investigate the effect of social interactions on labor market outcomes using a direct measure of social contacts based on information about individuals’ three best friends and their characteristics. We examine the effect of the number of employed friends on the transition from non-employment to employment, and we find the existence of significant network effects at the individual level. An additional employed friend increases the probability of finding a job by 3.7 percentage points. This finding is robust to specifications that address the endogeneity of friends’ employment status, which may be induced by correlation with unobserved individual attributes and feedback effects. Considering labor market outcomes, we find evidence of higher wages and employment stability for those with more employed friends, which is consistent with networks acting as an information transmission mechanism.networks, unemployment, friendship ties