Cyclical Move to Opportunities

Ester Faia and Ekaterina Shabalina

No 18546, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the consequences of technological progress for the dynamic of job flows and wage growth along the income distribution. Estimating elasticities of wages and job flows across income percentiles, with CPS data and local projections, we find that technological shocks (aggregate and sectoral) hit dis-proportionally more separation, gross flows and wage growth of bottom earners and of routinary workers, while those for top earners are sheltered from fluctuations. The asymmetric response points to a selection channel. We build a general equilibrium model with uninsurable risk, skill heterogeneity, occupational choice, and occupational labour demand that varies across sectors. In the model income and wealth affect the transition probabilities: for this reason recessions (expansions) reduce (increase) participation and mobility to higher paying jobs, or for which workers have higher comparative advantage (or else to opportunity), and more so for bottom earners and routinary workers. The model quantitatively replicates the empirical estimates of the elasticities.

JEL-codes: D31 E21 J22 J23 J31 J62 (search for similar items in EconPapers)
Date: 2023-10
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