Wage Mobility: A Functional Copula Approach

76 Pages Posted: 10 Dec 2018

See all articles by Costanza Naguib

Costanza Naguib

University of St. Gallen; University of Lugano

Patrick Gagliardini

USI Università della Svizzera italiana; Swiss Finance Institute

Date Written: September 2018

Abstract

The study of wage dynamics over time is more insightful than the analysis of point-in-time inequality measures. In policy-making, indeed, low wage careers instead of low-wage jobs should be at the center of the debate on long-term wage inequality. Many previous studies tried to estimate the degree of wage mobility within an economy; however, they rely on some quite restrictive modelling assumptions. The aim of this paper is to develop a new semi-nonparametric copula model in order to describe more accurately the wage dynamics and its dependence on the worker’s past position in the distribution and on some individual characteristics. We apply this functional copula model to US data. We find that positional persistence at the bottom of the distribution is high for workers with a low education level, i.e. for those individuals we find evidence of the existence of a ”low-wage trap”.

Keywords: Wage Dynamics, Inequality, Rank, Functional Copula Model, Nonlinear Autoregressive Process, Semi-Nonparametric Estimation

JEL Classification: C14, J31

Suggested Citation

Naguib, Costanza and Gagliardini, Patrick, Wage Mobility: A Functional Copula Approach (September 2018). Available at SSRN: https://ssrn.com/abstract=3286095 or http://dx.doi.org/10.2139/ssrn.3286095

Costanza Naguib (Contact Author)

University of St. Gallen ( email )

Switzerland

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, Ticino 6900
Switzerland

Patrick Gagliardini

USI Università della Svizzera italiana ( email )

Via Buffi 13
Lugano, TN 6900
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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