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Is there a low-pay no-pay cycle in Australia? A note on Fok, Scutella and Wilkins (2015)

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  • Lixin Cai

    (University of Adelaide)

Abstract

A recent study by Fok et al. (Oxf Bull Econ Stat 77:872–896, 2015) concludes that there is a low-pay no-pay cycle for males and females in the Australian labour market. This note re-estimates the model of that study using the same data. It is found that Fok et al. (2015) conclusion is based on a model specification that assumes zero correlation of unobserved heterogeneity between the different labour force states modelled. The results of this note show that when the zero correlation restriction is relaxed, there is no evidence of a low-pay no-pay cycle for either males or females. It is also found that the marginal effect estimates used in Fok et al. (2015) to draw the low-pay no-pay cycle conclusion for males and females have been estimated imprecisely. Furthermore, contrary to what Fok et al. (2015) have concluded, the results of this note show that there is no evidence on heterogeneity in the low-pay no-pay cycle across the demographic subgroups examined by Fok et al. (2015).

Suggested Citation

  • Lixin Cai, 2020. "Is there a low-pay no-pay cycle in Australia? A note on Fok, Scutella and Wilkins (2015)," Empirical Economics, Springer, vol. 59(3), pages 1493-1511, September.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:3:d:10.1007_s00181-019-01663-y
    DOI: 10.1007/s00181-019-01663-y
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    References listed on IDEAS

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    1. Yin King Fok & Rosanna Scutella & Roger Wilkins, 2015. "The Low-Pay No-Pay Cycle: Are There Systematic Differences across Demographic Groups?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 872-896, December.
    2. 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.
    3. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54, January.
    4. Sloane, P. J. & Theodossiou, I., "undated". "An Econometric Analysis of Low Pay Earnings Mobility," Working Papers 98-05, Department of Economics, University of Aberdeen.
    5. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.
    6. Clark, Ken & Kanellopoulos, Nikolaos C., 2013. "Low pay persistence in Europe," Labour Economics, Elsevier, vol. 23(C), pages 122-134.
    7. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54, January.
    8. Rita Asplund & Peter Sloane & Ioannis Theodossiou (ed.), 1998. "Low Pay and Earnings Mobility in Europe," Books, Edward Elgar Publishing, number 1533.
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    Cited by:

    1. Lixin Cai, 2023. "The Steppingstone Effect of Casual Employment in Australia: A Re‐Examination," The Economic Record, The Economic Society of Australia, vol. 99(326), pages 385-409, September.

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    More about this item

    Keywords

    Multinomial logit models; Low-pay dynamics; Parametric bootstrapping; Random effects;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Is there a low-pay no-pay cycle in Australia? A note on Fok, Scutella and Wilkins (2015) (Emp Econ 2020) in ReplicationWiki

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