Wage changes through job mobility in Europe: A multinomial endogenous switching approach Jose ´ Ignacio Garcı ´a Pe ´rez a , Yolanda Rebollo Sanz b, * a Centro de Estudios Andaluces and Universidad Pablo de Olavide, Spain b Departamento de Economı ´a, Met. Cuantitativos e Hist. Economica, Universidad Pablo de Olavide, Spain Abstract This paper presents evidence on the relationship between job mobility and wage mobility for various European countries using the European Community Household Panel (1994–2001). While much of the earlier research uses least-squares regression to predict wages for individuals with different labour market experience, we have found that it is important to take into account the possible non-random selection between job movers and stayers and between voluntary and involuntary movers. In this paper we focus on the effects of an unemployment spell on subsequent wages by estimating a multinomial endogenous switching model composed of two selection equations and three wage equations. Our results indicate that job mobility through unemployment has negative returns in all the analysed economies. As regards stayers, these losses range from 8% in Portugal to 21% in Germany while losses with respect to voluntary movers vary from 14% in Spain to 31% in Portugal. D 2005 Elsevier B.V. All rights reserved. JEL classification: J31; J63; J65 Keywords: Wage mobility; Job mobility; Unemployment; Endogenous switching; Multinominal probit; Wage penalties 1. Introduction A great deal of attention has been paid to the relationship between job mobility and wage mobility, as it is unclear what the effect is of different work experiences on 0927-5371/$ - see front matter D 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.labeco.2005.05.005 * Corresponding author. Tel.: +34 954 348915. E-mail address: yfrebsan@upo.es (Yolanda Rebollo Sanz). Labour Economics 12 (2005) 531 – 555 www.elsevier.com/locate/econbase