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Patterns of earnings differentials across three conservative European welfare regimes with alternative education systems

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  • Rosalia Castellano
  • Gennaro Punzo

Abstract

The aim of this paper is to investigate, from a generational perspective, the effect of human capital on individual earnings and earnings differences in Germany, France and Italy, three developed countries in Western Europe with similar conservative welfare regimes but with important differences in their education systems. Income inequalities between and within education levels are explored using a two-stage probit model with quantile regressions in the second stage. More precisely, drawing upon 2005 EU-SILC data, returns on schooling and experience are estimated separately for employees and self-employed full-time workers by means of Mincerian earnings equations with sample selection; the sample selection correction accounts for the potential individual self-selection into the two labour force types. Although some determinants appear to be relatively similar across countries, state-specific differentials are drawn in light of the institutional features of each national context. The study reveals how each dimension of human capital differently affects individuals’ earnings and earnings inequality and, most of all, how their impacts differ along the conditional earnings distribution and across countries. In the comparative perspective, the country's leading position in terms of the highest rewards on education also depends on which earnings distribution (employee vs. self-employed) is analysed.

Suggested Citation

  • Rosalia Castellano & Gennaro Punzo, 2016. "Patterns of earnings differentials across three conservative European welfare regimes with alternative education systems," Journal of Applied Statistics, Taylor & Francis Journals, vol. 43(1), pages 140-168, January.
  • Handle: RePEc:taf:japsta:v:43:y:2016:i:1:p:140-168
    DOI: 10.1080/02664763.2015.1049518
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    References listed on IDEAS

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    1. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444606, January.
    2. Pedro Telhado Pereira & Pedro Silva Martins, 2000. "Does education reduce wage inequality? Quantile regressions evidence from fifteen European countries," Nova SBE Working Paper Series wp379, Universidade Nova de Lisboa, Nova School of Business and Economics.
    3. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444590, January.
    4. Staneva, Anita & Arabsheibani, Reza & Murphy, Philip D., 2010. "Returns to Education in Four Transition Countries: Quantile Regression Approach," IZA Discussion Papers 5210, Institute of Labor Economics (IZA).
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    Cited by:

    1. Rosalia Castellano & Gaetano Musella & Gennaro Punzo, 2019. "Exploring changes in the employment structure and wage inequality in Western Europe using the unconditional quantile regression," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 249-304, May.

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