Worker Turnover and Wages in Europe: The Influence of Unemployment and Inactivity

This paper aims to estimate the impact of different labour market transitions on wages by applying recent panel data methods designed to address problems of sample selectivity, unobserved heterogeneity and endogeneity to longitudinal data on individual workers from six European countries for the period 1995–2001. In particular, we examine whether job interruptions due to unemployment or inactivity have any significant influence on subsequent wages, the magnitude of this influence and whether differences in relative wage gains/losses exist across countries. The main findings are explained in terms of differences in institutions.