Wage mobility in Europe. A comparative analysis using restricted multinomial logit regression

Abstract

The paper investigates cross-country differences in wage mobility in Europe using the European Community Household Panel. We examine the impact of specific wage-setting institutions, such as the collective bargaining and the trade union density, the employment protection regulation and the welfare state regime on wage mobility. We apply a log-linear approach that is very much similar to a restricted multinomial logit model and much more flexible than the standard probit approach that is typically applied in the research on wage mobility. It is shown that the macro-economic context and the aforementioned specific institutions explain a substantial part of the cross-country variation that is larger than the part that regime type explains. The findings also confirm the existence of an inverse U-shape pattern of wage mobility, showing a great deal of low-wage and high-wage persistence in all countries. © 2008 Springer Science+Business Media B.V.