published in: Journal of Population Economics, 2007, 20 (3), 465-482
This paper uses Italian panel data to analyse transition probabilities at the bottom of the
earnings distribution during the 1990s. The analytical framework is characterised by the
ability to account for the endogeneity of initial conditions, educational attainment and
earnings attrition, providing a model that encompasses those applied by previous research.
Results show that the three selection mechanisms are endogenous for the estimation of low
pay transitions. The data also reveal considerable state dependence, i.e. the experience of
low pay is found to raise, per se, the probability of subsequent low pay episodes. Low pay
persistence and entry rates are found to be larger among female employees, the low
educated, manual workers in small firms and workers from the South relative to otherwise
comparable individuals.
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