Modelling Low Pay Transition Probabilities, Accounting for Panel Attrition, Non-Response, and Initial Conditions
39 Pages Posted: 6 Aug 2004
Date Written: July 2004
We model annual low pay transition probabilities taking account of three potentially endogenous selections: two sample drop-out mechanisms (panel attrition, non-employment) and 'initial conditions' (base-year low pay status). This model, and variants that ignore one or more of these selection mechanisms, are fitted to data for men from the British Household Panel Survey. Tests of the ignorability of the endogenous selection mechanisms suggest that 'economic' selection mechanisms, such as initial conditions and retention of employment, are more important than the 'survey' selection mechanism (attrition). However, consistent with related U.S. research, relatively simple models provide estimates of ovariate effects that differ little from the estimates from the complicated models.
Keywords: Transition probabilities, low pay, attrition, non-response, ignorability
JEL Classification: C33, J31, J64
Suggested Citation: Suggested Citation