IDEAS home Printed from https://ideas.repec.org/p/cpd/pd2002/b2-4.html
   My bibliography  Save this paper

The Inter-related Dynamics of Unemployment and Low Pay

Author

Listed:
  • Mark B. Stewart

    (University of Warwick)

Abstract

This paper examines the extent of state dependence in individual unemployment and low paid employment and the inter-related dynamics between the two. Evidence is presented that (after controlling for unobserved heterogeneity and initial conditions) the low paid are more likely to become unemployed and the unemployed more likely to be low paid on re-entry to employment. The impacts of unemployment and low pay are found to be insignificantly different from one another, both on the probability of unemployment in the next period and on the probability of low pay. Evidence is presented that low paid jobs act as the main conduit for repeat unemployment and considerably increase its probability. Those who get a better paid job eliminate the increased risk of repeat unemployment.

Suggested Citation

  • Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
    • Handle: RePEc:cpd:pd2002:b2-4
    as

    Download full text from publisher

    File URL: http://econpapers.repec.org/cpd/2002/108_Stewart.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Paul Gregg, 1997. "Jobs, Wages And Poverty: Patterns Of Persistence And Mobility In The Flexible Labour Market," CEP Reports 03, Centre for Economic Performance, LSE.
    3. Dean Hyslop, 1995. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Participation Behavior: Monte Carlo Evidence and Empirical Results for Married Women," Working Papers 726, Princeton University, Department of Economics, Industrial Relations Section..
    4. Barry McCormick, 1990. "A Theory of Signalling During Job Search, Employment Efficiency, and "Stigmatised" Jobs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 299-313.
    5. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 417-434.
    6. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    7. Wiji Arulampalam, 1999. "A Note on Estimated Coefficients in Random Effects Probit Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 597-602, November.
    8. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    9. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318, Elsevier.
    10. repec:fth:prinin:347 is not listed on IDEAS
    11. Dean Hyslop, 1995. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Participation Behavior: Monte Carlo Evidence and Empirical Results for Married Women," Working Papers 726, Princeton University, Department of Economics, Industrial Relations Section..
    12. Paul Gregg & Jonathan Wadsworth, 1996. "Mind the Gap," CEP Discussion Papers dp0303, Centre for Economic Performance, LSE.
    13. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    14. Acemoglu, D, 1996. "Good Jobs Versus Bad Jobs : Theory and Some Evidence," Working papers 96-33, Massachusetts Institute of Technology (MIT), Department of Economics.
    15. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-375, April.
    16. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-764, May.
    17. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
    18. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
    19. Mark B. Stewart & Joanna K. Swaffield, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
    20. Kenneth Y. Chay & Dean R. Hyslop, 2014. "Identification and Estimation of Dynamic Binary Response Panel Data Models: Empirical Evidence Using Alternative Approaches," Research in Labor Economics, in: Safety Nets and Benefit Dependence, volume 39, pages 1-39, Emerald Group Publishing Limited.
    21. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    22. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
    23. Paul Gregg & Jonathan Wadsworth, 2000. "Mind the Gap, Please: The Changing Nature of Entry Jobs in Britain," Economica, London School of Economics and Political Science, vol. 67(268), pages 499-524, November.
    24. Narendranathan, Wiji & Elias, Peter, 1993. "Influences of Past History on the Incidence of Youth Unemployment: Empirical Findings for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 161-185, May.
    25. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    26. Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
    27. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, vol. 81(2), pages 75-79, May.
    28. Butler, J S, 1996. "Estimating the Correlation in Censored Probit Models," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 356-358, May.
    29. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A burden on the taxpayer?
      by chris dillow in Stumbling and Mumbling on 2007-11-16 16:26:18

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hielke Buddelmeyer & Wang‐Sheng Lee & Mark Wooden, 2010. "Low‐Paid Employment and Unemployment Dynamics in Australia," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 28-48, March.
    2. Lorenzo Cappellari & Stephen P. Jenkins, 2014. "The Dynamics of Social Assistance Benefit Receipt in Britain," Research in Labor Economics, in: Safety Nets and Benefit Dependence, volume 39, pages 41-79, Emerald Group Publishing Limited.
    3. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages 585-606, November.
    4. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages 189-213, June.
    5. Pinheiro, Roberto & Visschers, Ludo, 2015. "Unemployment risk and wage differentials," Journal of Economic Theory, Elsevier, vol. 157(C), pages 397-424.
    6. Marjan, MAES, 2008. "Poverty persistence among Belgian elderly in the transition from work to retirement : an empirical analysis," Discussion Papers (ECON - Département des Sciences Economiques) 2008042, Université catholique de Louvain, Département des Sciences Economiques.
    7. Luigi Aldieri, 2009. "The Effects of Unemployment Experiences on Subsequent Wages in Italy," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(2), pages 109-119.
    8. Biewen, Martin, 2004. "Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition?," IZA Discussion Papers 1138, Institute of Labor Economics (IZA).
    9. Francesconi, Marco & L. Booth, Alison & Frank, Jeff, 2000. "Temporary jobs: who gets them, what are they worth, and do they lead anywhere?," ISER Working Paper Series 2000-13, Institute for Social and Economic Research.
    10. Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, March.
    11. Bardasi, Elena & Francesconi, Marco, 2000. "The Effect of Non-Standard Employment on Mental Health in Britain," IZA Discussion Papers 232, Institute of Labor Economics (IZA).
    12. Lorenzo Cappellari & Richard Dorsett & Getinet Haile, 2010. "State dependence and unobserved heterogeneity in the employment transitions of the over-50s," Empirical Economics, Springer, vol. 38(3), pages 523-554, June.
    13. Cappellari, Lorenzo & Jenkins, Stephen P., 2008. "The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain," IZA Discussion Papers 3765, Institute of Labor Economics (IZA).
    14. Konstantinos Pouliakas & Ioannis Theodossiou, 2005. "Socio-Economic Differences in the Perceived Quality of High and Low-Paid Jobs in Europe," Labor and Demography 0506002, University Library of Munich, Germany.
    15. Paul Gregg & Emma Tominey, 2004. "The Wage Scar from Youth Unemployment," The Centre for Market and Public Organisation 04/097, The Centre for Market and Public Organisation, University of Bristol, UK.
    16. Lorenzo Cappellari, 2007. "Earnings mobility among Italian low-paid workers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(2), pages 465-482, April.
    17. Dragana Djurdjevic, 2005. "Unemployment and Under-Employment: The Case of Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(I), pages 23-70, March.
    18. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling Low Pay Transition Probabilities, Accounting for Panel Attrition, Non-Response, and Initial Conditions," CESifo Working Paper Series 1232, CESifo.
    19. Maes, Marjan, 2008. "Poverty persistence among Belgian elderly: true or spurious?," ISER Working Paper Series 2008-24, Institute for Social and Economic Research.
    20. Hämäläinen, Kari, 2003. "Education and Unemployment: State Dependence in Unemployment Among Young People in the 1990s," Discussion Papers 312, VATT Institute for Economic Research.

    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. Mark B. Stewart, 2007. "The interrelated dynamics of unemployment and low-wage employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 511-531.
    2. Mavromaras, Kostas & Polidano, Cain, 2011. "NILS Working paper no 165. Improving the employment rates of people with disabilities through vocational education," NILS Working Papers 26068, National Institute of Labour Studies.
    3. Matteo Richiardi & Ambra Poggi, 2014. "Imputing Individual Effects in Dynamic Microsimulation Models. An application to household formation and labour market participation in Italy," International Journal of Microsimulation, International Microsimulation Association, vol. 7(2), pages 3-39.
    4. Shiu, Ji-Liang & Hu, Yingyao, 2013. "Identification and estimation of nonlinear dynamic panel data models with unobserved covariates," Journal of Econometrics, Elsevier, vol. 175(2), pages 116-131.
    5. Andreas Knabe & Alexander Plum, 2013. "Low-wage Jobs — Springboard to High-paid Ones?," LABOUR, CEIS, vol. 27(3), pages 310-330, September.
    6. Ken Clark & Nikolaos C. Kanellopoulos, 2009. "Low Pay Persistence in European Countries," SOEPpapers on Multidisciplinary Panel Data Research 207, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Boheim, Rene & Taylor, Mark P., 2002. "The search for success: do the unemployed find stable employment?," Labour Economics, Elsevier, vol. 9(6), pages 717-735, December.
    8. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 53-72, April.
    9. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2017. "Time Aggregation and State Dependence in Welfare Receipt," Economic Journal, Royal Economic Society, vol. 127(604), pages 1833-1873, September.
    10. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages 585-606, November.
    11. Hämäläinen, Kari, 2003. "Education and Unemployment: State Dependence in Unemployment Among Young People in the 1990s," Discussion Papers 312, VATT Institute for Economic Research.
    12. Panos, Sousounis, 2008. "State dependence in work-related training participation among British employees: A comparison of different random effects probit estimators," MPRA Paper 14261, University Library of Munich, Germany, revised Mar 2009.
    13. Mavromaras, Kostas & Polidano, Cain, 2011. "Improving the Employment Rates of People with Disabilities through Vocational Education," IZA Discussion Papers 5548, Institute of Labor Economics (IZA).
    14. Plum, Alexander & Knies, Gundi, 2015. "Earnings prospects for low-paid workers higher than for the unemployed but only in high-pay areas with high unemployment," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112845, Verein für Socialpolitik / German Economic Association.
    15. Clark, Ken & Kanellopoulos, Nikolaos C., 2013. "Low pay persistence in Europe," Labour Economics, Elsevier, vol. 23(C), pages 122-134.
    16. Amynah Gangji & Robert Plasman, 2008. "Microeconomic analysis of unemployment persistence in Belgium," International Journal of Manpower, Emerald Group Publishing Limited, vol. 29(3), pages 280-298, June.
    17. Plum, Alexander & Knies, Gundi, 2015. "Does neighbourhood unemployment affect the springboard effect of low pay?," ISER Working Paper Series 2015-20, Institute for Social and Economic Research.
    18. Nisar Ahmad, 2014. "State Dependence in Unemployment," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 93-106.
    19. Hujer, Reinhard & Zeiss, Christopher, 2006. "Macroeconomic Effects of Short-Term Training Measures on the Matching Process in Western Germany," IZA Discussion Papers 2489, Institute of Labor Economics (IZA).
    20. Sebastian Kripfganz, 2017. "Sequential (two-stage) estimation of linear panel-data models," German Stata Users' Group Meetings 2017 03, Stata Users Group.

    More about this item

    Keywords

    unemployment; low pay; dynamics; state dependence; unobserved heterogeneity; wage mobility; dynamic random effects models; repeat unemployment; recurrent unemployment.;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cpd:pd2002:b2-4. 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: Sune Karlsson (email available below). General contact details of provider: .

    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.