Abstract
This paper examines employment transitions among men and women in the UK aged between 50 and the state pension age. We use a fourth order Markov model to estimate quarterly transitions while allowing for potential endogeneity of initial conditions. The results reject exogeneity of initial conditions and show the importance of state dependence. We compare the results to those obtained with a younger sample and find evidence of a sorting process over the life-cycle whereby men’s employment transitions are increasingly characterized by state dependence while, for women, unobserved heterogeneity becomes more important. We discuss some potential policy implications of the results.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Andrén T (2007) The persistence of welfare participation. IZA discussion paper 3100
Arulampalam W, Booth A, Taylor M (2000) Unemployment persistence. Oxf Econ Pap 52: 24–50
Blundell R, Meghir C, Smith S (2002) Pension incentives and the pattern of early retirement. Econ J 112: C153–C170
Dean M (2003) Growing older in the 21st century. ESRC growing older program. Available via DIALOG. http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/Images/GO_in_the_21st_Century_tcm6-5504.pdf. Accessed 20 January 2009
Disney R, Emmerson C, Wakefield M (2006) Ill health and retirement in Britain: a panel data-based analysis. J Health Econ 25: 621–649
DWP (2006) A new deal for welfare: empowering people to work. TSO, London
Haardt D (2006) Transitions out of and back to employment among older men and women in the UK. ISER working paper 2006-20
Hansen J, Lofstrom M and Zhang X (2006) State dependence in Canadian welfare participation. IZA discussion paper no. 2266
Heckman J (1981) The incidental parameters problem and the problem of initial conditions in estimating a discrete time—discrete data stochastic process. In: Manski C, McFadden D(eds) Structural analysis of discrete data with economic applications. MIT Press, Cambridge
Lancaster T (1990) The econometric analysis of transition data. Econometric society monographs. Cambridge University Press, Cambridge
Marmot M, Banks J, Blundell R, Lessof C, Nazroo J (eds) (2003) Health, wealth and lifestyles of the older population in England: the 2002 English longitudinal study of ageing. Institute for Fiscal Studies, London
Meghir C, Whitehouse E (1997) Labour market transitions and retirement of men in the UK. J Econom 79:327–354
Miller C, Bewley H, Campbell-Barr V, Dorsett R, Hamilton G, Hoggart L, Homonoff T, Marsh A, Ray K, Riccio J, Vegeris S (2008) Implementation and second-year impacts for new deal 25 plus customers in the UK employment retention and advancement (ERA) demonstration. DWP research report 520
OECD (2006) Live longer, work longer. OECD Publishing, Paris
Riccio J, Bewley H, Campbell-Barr V, Dorsett R, Hamilton G, Hoggart L, Marsh A, Miller C, Ray K, Vegeris S (2008) Implementation and second-year impacts for lone parents in the UK employment retention and advancement (ERA) demonstration. DWP research report 489
Stewart M (2007) The interrelated dynamics of unemployment and low pay. J Appl Econ 22: 511–531
Wooldridge J (2005) Simple solutions to the initial conditions problem for dynamic, nonlinear panel data models with unobserved heterogeneity. J Appl Econ 20: 39–54
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Cappellari, L., Dorsett, R. & Haile, G. State dependence and unobserved heterogeneity in the employment transitions of the over-50s. Empir Econ 38, 523–554 (2010). https://doi.org/10.1007/s00181-009-0278-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00181-009-0278-6