Wage dynamics and labor market transitions: a reassessment through total income and “usual” wages

Maria Canon () and Ronni Pavan

No 2014-32, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We present a simple on-the-job search model in which workers can receive shocks to their employer-specific c productivity match. Because the firm-specific match can vary, wages may increase or decrease over time at each employer. Therefore, for some workers, job-to-job transitions are a way to escape job situations that worsened over time. The contribution of our paper relies on our novel approach to identifying the presence of the shock to the match specific productivity. The presence two independent measures of workers compensation in our dataset of is crucial for our identification strategy. In the first measure, workers are asked about the usual wage they earn with a certain employer. In the second measure, workers are asked about their total amount of labor earnings during the previous year. While the first measure records the wages at a given point in time, the second measure records the sum of all wages within one year. We calibrate our model using both measures of workers compensation and data on employment transitions. The results show that 59% of the observed wage cuts following job-to- job transitions are due to deterioration of the firm-specific component of wages before workers switch employers.

Keywords: wage dynamics; earnings dynamics; job mobility. (search for similar items in EconPapers)
JEL-codes: J3 J6 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-10-30
New Economics Papers: this item is included in nep-dge, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://research.stlouisfed.org/wp/2014/2014-032.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2014-032

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().