On-the Job Wage Dynamics

Eric Smith

No 10788, CESifo Working Paper Series from CESifo

Abstract: This paper assesses wage setting and wage dynamics in a search and matching framework where (i) workers and firms on occasion meet multilaterally; (ii) workers can recall previous encounters with firms; and (iii) firms cannot commit to future wages and workers cannot commit to not searching on the job. The resulting progression of wages (from firms paying just enough to keep their workers) yields a compensation structure consistent with well established but difficult to reconcile observations on pay dynamics within jobs at firms. Along with wage tenure effects, serial correlation in wage changes and wage growth are negatively correlated with initial wages.

Keywords: wage dynamics; stock-flow matching; on-the-job search; no commitment (search for similar items in EconPapers)
JEL-codes: J31 J63 J64 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10788

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