Lorenzo Cappellari

Who Stays Poor? Who Becomes Poor? Evidence from the British Household Panel Survey

We estimate a first-order Markov model of poverty persistence and entry rates for working-age Britons and demonstrate the importance of controlling for endogenous selection via initial poverty status and attrition. Predicted poverty transition rates reveal substantial heterogeneity in poverty transition rates, but there is also substantial genuine state dependence in poverty.

Do the 'Working Poor' Stay Poor? An Analysis of Low Pay Transitions in Italy

This paper uses survey panel data to look at transition probabilities at the bottom of the Italian earnings distribution. The econometric analysis is characterized by a proper treatment of the initial conditions problem and by the investigation of genuine state dependence, the extent with which low pay probabilities depend upon the past experience of low pay other things equal. Results indicate that initial conditions are endogenous and that genuine state dependence can be relevant in determining low pay persistence. On the other hand, individual attributes are found to affect on transition probabilities, although to a limited extent. Copyright 2002 by Blackwell Publishing Ltd

Why so Unhappy? The Effects of Unionisation on Job Satisfaction

We use linked employer-employee data to investigate the job satisfaction effect of unionisation in Britain. We depart from previous studies by developing a model that simultaneously controls for the endogeneity of union membership and union recognition. We show that a negative association between membership and satisfaction only emerges where there is a union recognised for bargaining, and that such an effect vanishes when the simultaneous selection into membership and recognition is taken into account. We also show that ignoring endogenous recognition would lead to conclude that membership has a positive effect on satisfaction. Our estimates indicate that the unobserved factors that lead to sorting across workplaces are negatively related to the ones determining membership and positively related with those generating satisfaction, a result that we interpret as being consistent with the existence of queues for union jobs.

Transitions between unemployment and low pay

There is a great interest in Britain in the extent to which there exist a ‘low pay/no pay cycle’. That is, to what extent are individuals who are currently low paid more likely to become unemployed than high paid individuals, and are those who are currently unemployed more likely to become low paid rather then high paid when they get a job? To address these and related questions, we model annual transitions between unemployment, low-paid employment and high-paid employment. We use a first order Markov model that also takes into account the endogeneity of initial conditions, selection into employment, and sample attrition. The application is based on data for men from the British Household Panel Survey covering survey years 1991–2000. Our results show that all three selectivity issues should be addressed when analysing men’s labour market transitions. We find that low-paid men are more likely to become unemployed then high-paid men, and unemployed men have a greater chance of becoming low paid than do high-paid men. Transitions from unemployment to low pay are associated with having relatively few educational qualifications. There is also evidence that the experience of low pay or unemployment itself increases the chance of being trapped in those states (separately from the effects of individual heterogeneity).

The Dynamics and Inequality of Italian Men's Earnings: Long-term Changes or Transitory Fluctuations?

This paper provides a longitudinal perspective on changes in Italian men’s earnings inequality since the late 1970s by decomposing the earnings autocovariance structure into its long-term and transitory parts. Cross-sectional earnings differentials grew over the period and the longitudinal analysis shows that such growth was determined by the long-term earnings component. Using parameter estimates to analyze low-pay probabilities shows that low-pay persistence and the probability of repeated low-pay episodes grew for all birth cohorts during the early 1990s. Moreover, long-term heterogeneity is found to characterize the earnings distribution of nonmanual workers, accounting for a large part of overall heterogeneity.

The covariance structure of italian male wages

Using an unbalanced panel of Italian male wages covering the 1974-88 interval this study estimates the parameters of the wage covariance structure by minimum distance. Estimated variance components models allow for a linear trend in permanent wages, so that wage profiles convergence can be assessed by considering the covariance between intercepts and slopes of such individual trends. Evidence of permanent wage convergence is found in the overall wage distribution, but not within white collar workers: this contracts with human capital interpretations of wage dynamics and suggests that other factors, such as the egalitarian wage setting framework fully effective until the mid-80s, could have played a major role in shaping the wage distribution. Copyright 2000 by Blackwell Publishers Ltd and The Victoria University of Manchester

The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain

We model the dynamics of social assistance benefit receipt in Britain using data from the British Household Panel Survey, waves 1-15. First, we discuss definitions of social assistance benefit receipt, and present information about the trends between 1991 and 2005 in the receipt of social assistance benefits, and in annual rates of transition into and out of receipt. Second, we review potential multivariate modelling approaches especially the dynamic random effects probit models that are used in our empirical analysis and, third, discuss sample selection criteria and explanatory variables. Fourth, we present our regression estimation estimates and interpret them. The final section contains a summary of the substantive results, and highlights some lessons concerning application of the analysis for other countries and some methodological issues.

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.

The Dynamics of Social Assistance Benefit Receipt in Britain

We analyze the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate, rather than by the SA exit rate (which actually declined too). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA entry and exit probabilities applied to British Household Panel Survey data. The model estimates and accompanying counterfactual simulations highlight the importance of two factors – the decline in the unemployment rate over the period, and other changes in the socioeconomic environment including two reforms to the income maintenance system in the 1990s. The results also reveal a substantial heterogeneity in SA annual transition rates.

Correlations of Brothers' Earnings and Intergenerational Transmission

We estimate sibling correlations and intergenerational transmission of life cycle earnings within a unified framework that nests previous models. Using data on the Danish population of father/first-son/second-son triads we find that intergenerational effects account for 72% of sibling correlations. This share is higher than in previous studies because we allow for heterogeneous intergenerational transmission between families. For the first time, we show significant U-shaped life cycle variation in sibling correlations, consistent with human capital models. Estimates of intergenerational mobility are of greater value than previously thought for understanding the role of the family in explaining earnings inequality.