Title: Earnings mobility and measurement error
Description: "The degree of mobility in incomes is often seen as an important measure of the equality of opportunity in a society and of the flexibility and freedom of its labor market.  But estimation of mobility using panel data is biased by the presence of measurement error and non-random attrition from the panel.  This paper shows that dynamic pseudo-panel methods can be used to consistently estimate measures of absolute and conditional mobility in the presence of non-classical measurement errors.  These methods are applied to data on earnings from a Mexican quarterly rotating panel.  Absolute mobility in earnings is found to be very low in Mexico, suggesting that the high level of inequality found in the cross-section will persist over time.  However, the paper finds conditional mobility to be high, so that households are able to recover quickly from earnings shocks.  These findings suggest a role for policies which address underlying inequalities in earnings opportunities. "--World Bank web site.
Subjects: Equality, Income distribution, Labor market, Social mobility, Wages
Places: Mexico