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Assessing the equalizing force of mobility using short panels: France, 1990-2000

Author

Listed:
  • Stéphane Bonhomme

    (CEMFI - Centro de Estudios Monetarios y Financieros)

  • Jean-Marc Robin

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

In this paper, we document whether and how much the equalizing force of earnings mobility has changed in France in the 1990s. For this purpose, we use a representative three-year panel, the French Labour Force Survey. We develop a model of earnings dynamics that combines a flexible specification of marginal earnings distributions (to fit the large cross-sectional dimension of the data) with a tight parametric representation of the dynamics (adapted to the short timeseries dimension). Log earnings are modelled as the sum of a deterministic component, an individual fixed effect and a transitory component which is assumed first-order Markov. The transition probability of the transitory component is modelled as a one-parameter Plackett copula. We estimate this model using a sequential EM algorithm. We exploit the estimated model to study employment/earnings inequality in France over the 1990-2002 period. We show that, in phase with business cycle fluctuations (a recession in 1993 and two peaks in 1990 and 2000), earnings mobility decreases when cross-section inequality and unemployment risk increase. We simulate individual earnings trajectories and compute present values of lifetime earnings for various horizons. Inequality presents a hump-shaped evolution over the period, with a 9% increase between 1990 and 1995 and a decrease afterwards. Accounting for unemployment yields an increase of 11%. Moreover, this increase is persistent, as it translates into a 12% increase in the variance of log present values. The ratio of inequality in present values to inequality in one-year earnings, a natural measure of immobility or of the persistence of inequality, remains remarkably constant over the business cycle.

Suggested Citation

  • Stéphane Bonhomme & Jean-Marc Robin, 2009. "Assessing the equalizing force of mobility using short panels: France, 1990-2000," PSE-Ecole d'économie de Paris (Postprint) hal-00308801, HAL.
    • Handle: RePEc:hal:pseptp:hal-00308801
    DOI: 10.1111/j.1467-937X.2008.00521.x
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    More about this item

    Keywords

    Inequality; mobility; earnings dynamics; copulas;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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