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Low-Wage Employment in Portugal: A Mixed Logit Approach

Author

Listed:
  • Barros, Carlos Pestana

    (Universidade Técnica de Lisboa)

  • Proença, Isabel

    (Universidade Técnica de Lisboa)

  • Vieira, José António Cabral

    (University of the Azores)

Abstract
In this paper, we examine the determinants of low-wage employment in Portugal. For this purpose, we use a data file of the European Community Household Panel (ECHP) for the years 1998 and 1999. In order to take into account unobserved heterogeneity in the data, a random-parameter logit model is used to analyse the probability of a worker receiving a low wage. The results indicate that the consideration that the effects of the explanatory variables are the same across all individuals, such as is assumed in most of the literature may be misleading. From the policy perspective, this implies that the use of a single instrument in order to combat low-wage employment is inappropriate to satisfy the whole population. In view of this, policies tailored by clusters would be more appropriate.

Suggested Citation

  • Barros, Carlos Pestana & Proença, Isabel & Vieira, José António Cabral, 2005. "Low-Wage Employment in Portugal: A Mixed Logit Approach," IZA Discussion Papers 1667, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1667
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    References listed on IDEAS

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    1. Mark B. Stewart & Joanna K. Swaffield, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
    2. Jan Rouwendal & Erik Meijer, 2001. "Preferences for Housing, Jobs, and Commuting: A Mixed Logit Analysis," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 475-505, August.
    3. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    4. Lorenzo Cappellari, 2000. "Low‐wage mobility in the Italian labour market," International Journal of Manpower, Emerald Group Publishing Limited, vol. 21(3/4), pages 264-290, May.
    5. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    6. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, September.
    7. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
    8. Rita Asplund & Peter Sloane & Ioannis Theodossiou (ed.), 1998. "Low Pay and Earnings Mobility in Europe," Books, Edward Elgar Publishing, number 1533.
    9. Rannia Leontaridi & Peter Sloane, 2001. "Measuring The Quality Of Jobs," LoWER Working Papers wp7, AIAS, Amsterdam Institute for Advanced Labour Studies.
    10. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, September.
    11. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    12. Andrew Chesher & J. M. C. Santos Silva, 2002. "Taste Variation in Discrete Choice Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 147-168.
    13. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    14. José Cabral Vieira, 2005. "Low-wage mobility in the Portuguese labour market," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 4(1), pages 1-14, April.
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    Cited by:

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    2. Mendes, Rute & van den Berg, Gerard J. & Lindeboom, Maarten, 2010. "An empirical assessment of assortative matching in the labor market," Labour Economics, Elsevier, vol. 17(6), pages 919-929, December.

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    More about this item

    Keywords

    low-wage employment; random-parameter logit model; public policy;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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