[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ifs/cemmap/02-08.html
   My bibliography  Save this paper

Assessing the equalizing force of mobility using short panels: France 1990-2000

Author

Listed:
  • Stéphane Bonhomme

    (Institute for Fiscal Studies and University of Chicago)

  • Jean-Marc Robin

    (Institute for Fiscal Studies and Sciences Po and University College London)

Abstract
In this paper, we document whether and how much the equalizing force of earnings mobility has changed in France in the 1990s. For this purpose, we use a representative three-year panel,the French Labour Force Survey. We develop a model of earnings dynamics that combines a flexible specification of marginal earnings distributions (to fit the large cross-sectional dimension of the data) with a tight parametric representation of the dynamics (adapted to the short timeseries dimension). Log earnings are modelled as the sum of a deterministic component, an individual fixed effect, and a transitory component which is assumed first-order Markov. The transition probability of the transitory component is modelled as a one-parameter Plackett copula. We estimate this model using a sequential EM algorithm. We exploit the estimated model to study employment/earnings inequality in France over the 1990-2002 period. We show that, in phase with business cycle fluctuations (a recession in 1993 and two peaks in 1990 and 2000), earnings mobility decreases when cross-section inequality and unemployment risk increase. We simulate individual earnings trajectories and compute present values of lifetime earnings over various horizons. Inequality presents a hump-shaped evolution over the period, with a 9% increase between 1990 and 1995 and a decrease afterwards.Accounting for unemployment yields an increase of 11%. Moreover, this increase is persistent, as it translates into a 12% increase in the variance of log present values. The ratio of inequality in present values to inequality in one-year earnings, a natural measure of immobility or of the persistence of inequality, remains remarkably constant over the business cycle.

Suggested Citation

  • Stéphane Bonhomme & Jean-Marc Robin, 2008. "Assessing the equalizing force of mobility using short panels: France 1990-2000," CeMMAP working papers CWP02/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:02/08
    as

    Download full text from publisher

    File URL: http://cemmap.ifs.org.uk/wps/cwp208.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
    2. Fatih Guvenen, 2009. "An Empirical Investigation of Labor Income Processes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 58-79, January.
    3. Peter Arcidiacono & John Bailey Jones, 2003. "Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm," Econometrica, Econometric Society, vol. 71(3), pages 933-946, May.
    4. Martin Browning & Mette Ejrnæs & Javier Alvarez, 2010. "Modelling Income Processes with Lots of Heterogeneity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1353-1381.
    5. Audra J. Bowlus & Jean-Marc Robin, 2004. "Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 709-742.
    6. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September.
    7. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    8. Gregory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "The Empirical Content of the Job Search Model: Labor Mobility and Wage Distributions in Europe and the U.S.$," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 269-308, Emerald Group Publishing Limited.
    9. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-1262, December.
    10. Rolf Aaberge & Anders Björklund & Markus Jäntti & Mårten Palme & Peder J. Pedersen & Nina Smith & Tom Wennemo, 2002. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 443-469, December.
    11. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August.
    12. Burkhauser, Richard V & Holtz-Eakin, Douglas & Rhody, Stephen E, 1997. "Labor Earnings Mobility and Inequality in the United States and Germany during the Growth Years of the 1980s," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 775-794, November.
    13. Luigi Pistaferri & Richard Blundell & Ian Preston, 2004. "Consumption Inequality, Income Uncertainty and Insurance," 2004 Meeting Papers 215, Society for Economic Dynamics.
    14. Esfandiar Maasoumi & Mark Trede, 2001. "Comparing Income Mobility In Germany And The United States Using Generalized Entropy Mobility Measures," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 551-559, August.
    15. Geweke, John & Keane, Michael, 2007. "Smoothly mixing regressions," Journal of Econometrics, Elsevier, vol. 138(1), pages 252-290, May.
    16. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    17. Haider, Steven J, 2001. "Earnings Instability and Earnings Inequality of Males in the United States: 1967-1991," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 799-836, October.
    18. Storesletten, Kjetil & Violante, Giovanni & Heathcote, Jonathan, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers.
    19. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 603-640.
    20. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
    21. Christopher J. Flinn, 2002. "Labour Market Structure and Inequality: A Comparison of Italy and the U.S," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 611-645.
    22. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
    23. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    24. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, January.
    25. repec:bla:revinw:v:48:y:2002:i:4:p:443-69 is not listed on IDEAS
    26. Perri, Fabrizio & Krueger, Dirk, 2002. "Does Income Inequality Lead to Consumption Inequality?," CEPR Discussion Papers 3583, C.E.P.R. Discussion Papers.
    27. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    28. Joel L. Horowitz & Marianthi Markatou, 1993. "Semiparametric Estimation Of Regression Models For Panel Data," Econometrics 9309001, University Library of Munich, Germany.
    29. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages 68-73, March.
    30. VAN KERM Philippe, 2003. "What Lies Behind Income Mobility? Reranking and Distributional Change in Belgium, Western Germany and the USA," IRISS Working Paper Series 2003-03, IRISS at CEPS/INSTEAD.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j008g6g0g is not listed on IDEAS
    2. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09j008g6g0g is not listed on IDEAS
    3. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09j008g6g0g is not listed on IDEAS
    4. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09j008g6g0g is not listed on IDEAS
    5. repec:spo:wpmain:info:hdl:2441/dc0ckec3fcb29ms9850j92g21 is not listed on IDEAS
    6. Audra Bowlus & Jean-Marc Robin, 2008. "An international comparison of lifetime labor income values and inequality," Working Papers hal-03459796, HAL.
    7. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850j92g21 is not listed on IDEAS
    8. Markus Jäntti & Stephen P. Jenkins, 2013. "Income Mobility," SOEPpapers on Multidisciplinary Panel Data Research 607, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Richard Blundell & Hamish Low & Ian Preston, 2013. "Decomposing changes in income risk using consumption data," Quantitative Economics, Econometric Society, vol. 4(1), pages 1-37, March.
    10. Tejada, Mauricio M., 2016. "Lifetime inequality measures for an emerging economy: The case of Chile," Labour Economics, Elsevier, vol. 42(C), pages 1-15.
    11. Garnero, Andrea & Hijzen, Alexander & Martin, Sébastien, 2019. "More unequal, but more mobile? Earnings inequality and mobility in OECD countries," Labour Economics, Elsevier, vol. 56(C), pages 26-35.
    12. Flabbi, Luca & Leonardi, Marco, 2010. "Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market," European Economic Review, Elsevier, vol. 54(6), pages 832-854, August.
    13. repec:hal:spmain:info:hdl:2441/f0uohitsgqh8dhk98118l4kpj is not listed on IDEAS
    14. repec:spo:wpmain:info:hdl:2441/f0uohitsgqh8dhk98118l4kpj is not listed on IDEAS
    15. Bonhomme, Stéphane & Robin, Jean-Marc, 2008. "Articles : Conférence François-Albert-Angers – 2008 - La mesure des inégalités de long terme avec des panels courts : 1990-2000," L'Actualité Economique, Société Canadienne de Science Economique, vol. 84(4), pages 325-363, Décembre.
    16. Audra Bowlus & Jean-Marc Robin, 2010. "An International Comparison of Equalization Mobility and Lifetime Earnings Inequality: How Continental Europe Resembles North America," Working Papers hal-03473768, HAL.
    17. Audra J. Bowlus & Jean-Marc Robin, 2012. "An International Comparison Of Lifetime Inequality: How Continental Europe Resembles North America," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1236-1262, December.
    18. Audra Bowlus & Jean-Marc Robin, 2010. "An International Comparison of Equalization Mobility and Lifetime Earnings Inequality: How Continental Europe Resembles North America," SciencePo Working papers hal-03473768, HAL.
    19. Rolf Aaberge & Magne Mogstad, 2015. "Inequality in current and lifetime income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(2), pages 217-230, February.
    20. Giesecke, Matthias & Bönke, Timm & Lüthen, Holger, 2011. "The Dynamics of Earnings in Germany: Evidence from Social Security Records," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48692, Verein für Socialpolitik / German Economic Association.
    21. Robert Moffitt & Sisi Zhang, 2018. "Income Volatility and the PSID: Past Research and New Results," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 277-280, May.
    22. Costanza Naguib & Patrick Gagliardini, 2023. "A Semi-nonparametric Copula Model for Earnings Mobility," Diskussionsschriften dp2302, Universitaet Bern, Departement Volkswirtschaft.
    23. Stéphane Bonhomme & Jean-Marc Robin, 2008. "La mesure des inégalités de long terme avec des panels courts : 1990-2000," PSE-Ecole d'économie de Paris (Postprint) hal-03461814, HAL.
    24. Stephen Jenkins & Peter Lambert, 2011. "Robert Moffitt and Peter Gottschalk’s 1995 paper ‘Trends in the covariance structure of earnings in the US: 1969–1987’," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 433-437, September.
    25. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09j00488hg5 is not listed on IDEAS
    26. Richard Blundell & Hamish Low & Ian Preston, 2004. "Income risk and consumption inequality: a simulation study," IFS Working Papers W04/26, Institute for Fiscal Studies.
    27. Storesletten, Kjetil & Violante, Giovanni & Heathcote, Jonathan, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers.
    28. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j00488hg5 is not listed on IDEAS
    29. Masakatsu Okubo, 2015. "Earnings Dynamics and Profile Heterogeneity: Estimates from Japanese Panel Data," The Japanese Economic Review, Japanese Economic Association, vol. 66(1), pages 112-146, March.
    30. Dmytro Hryshko, 2012. "Labor income profiles are not heterogeneous: Evidence from income growth rates," Quantitative Economics, Econometric Society, vol. 3(2), pages 177-209, July.

    More about this item

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ifs:cemmap:02/08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emma Hyman (email available below). General contact details of provider: https://edirc.repec.org/data/cmifsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.