The relation between wealth and labour market transitions: an empirical study for the Netherlands

We study the relationship between wealth and labour market transitions. A lifecycle model, in which individuals are faced by uncertainty about the availability of jobs, serves as a basis for a reduced-form specification for the probabilities of labour market transitions, which depend on wealth according to the model. Theory implies a negative effect of wealth on the probability of becoming or staying employed. This implication is tested for in a reduced-from model of labour market transitions, in which we allow for random effects, initial conditions, and measurement error in wealth. Elasticities of transitions probabilities with respect to wealth are presented. Copyright © 2002 John Wiley & Sons, Ltd.