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Estimating low pay transition probabilities accounting for endogenous selection mechanisms

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  • Lorenzo Cappellari
  • Stephen P. Jenkins

Abstract

Summary. We propose a model of transitions into and out of low paid employment that accounts for non‐ignorable panel dropout, employment retention and base year low pay status (‘initial conditions’). The model is fitted to data for men from the British Household Panel Survey. Initial conditions and employment retention are found to be non‐ignorable selection processes. Whether panel dropout is found to be ignorable depends on how item non‐response on pay is treated. Notwithstanding these results, we also find that models incorporating a simpler approach to accounting for non‐ignorable selections provide estimates of covariate effects that differ very little from the estimates from the general model.

Suggested Citation

  • Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186, April.
    • Handle: RePEc:bla:jorssc:v:57:y:2008:i:2:p:165-186
    DOI: 10.1111/j.1467-9876.2007.00607.x
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    1. Stephen Pudney, 2008. "The dynamics of perception: modelling subjective wellbeing in a short panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(1), pages 21-40, January.
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