Discussion paper / School of Business & Economics ; 2010/28 : Economics
low pay dynamics; unemployment dynamics; dynamic random effects models; state dependence
We examine whether low-paid jobs have an effect on the occupational advancement
probability of unemployed persons to obtain better-paid jobs in the future (stepping-stone
effect). We make use of data from the German Socio-Economic Panel (SOEP) and apply a
dynamic random-effects probit model. Our results suggest that low-wage jobs can act as stepping
stones to better-paid work. The improvement of the chance to obtain a high-wage job by
accepting low-paid work is particularly large for less-skilled persons and for individuals with
longer unemployment experiences. Low-paid work is less beneficial if the job is also associated
with a low social status.
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