| Abstract: |
This study analyzes the mobility between three labor market states: working in
low paid jobs, working in higher paid jobs and not working. Using German panel
data I estimate dynamic multinomial logit panel data models with random
effects taking the initial conditions problem and potential endogeneity of
panel attrition into account. In line with results from other countries, this
first study on Germany finds true state dependence in low pay jobs and
confirms previous results of state dependence in non-employment. Moreover, I
find evidence for a "low pay no pay cycle", i.e. being low paid or not
employed itself increases the probability of being in one of these states in
the next year. However, compared to non working, being low paid does not have
adverse effects on future employment prospects: the employment probability
increases with low pay employment and the probability of being high paid seems
to be higher for previously low paid workers. I find no evidence for
endogenous panel attrition. |