Earnings Mobility in Europe: 1994-2001 - Do more flexible labour markets experience a higher earnings mobility?
Denisa Maria Sologon & Cathal O'Donoghue
#2011-070
The economic reality of the 1990s in Europe forced the labour markets to
become more flexible. Using a consistent comparative dataset for 14
European countries, the European Community Household Panel (ECHP), we
explore the evolution and the cross-national differences in earnings
mobility across Europe between 1994 and 2001 from three angles: first,
the evolution of short-term inequality and its link with cross-sectional
inequality; second, the evolution of long-term mobility relative to
short-term mobility and the implications for long-term inequality;
third, we try to understand the cross-national differences in earnings
mobility across Europe by exploring the cross-country heterogeneity in
labour market policies/institutions. We explore the rank mobility and
mobility as an equalizer of longer-term earnings. We find evidence
supporting a negative association between the evolution of earnings
inequality and earnings mobility. More flexible labour markets, with low
levels of regulation and with a high labour market support are found to
have higher earnings mobility. Similarly, unionization and corporatism
are positively associated with earnings mobility. The "Flexicurity"
countries (Denmark and Finland) have among the highest earnings mobility
levels in Europe, close to the Anglo-Saxon countries (Ireland and the
UK), whereas the Mediterranean countries with a strict regulation and a
low labour market support have the lowest mobility. Portugal is the only
country with disequalizing mobility in a long-term perspective
JEL Classification: D31,D39, D63, J08, J31, J50, J60
Keywords: earnings mobility, inequality, distributional change, labour
market policies and institutions