Firms as Learning Environments: Implications for Earnings Dynamics and Job Search

Victoria Gregory

No 2020-036, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper demonstrates that heterogeneity in firms' promotion of human capital accumulation is an important determinant of life-cycle earnings inequality. To arrive at this finding, I develop a life-cycle search model with heterogeneous workers and firms. In the model, a worker's earnings can grow through both human capital accumulation and labor market competition channels. Human capital growth depends on both the worker's ability and the firm's learning environment. I apply the model to administrative micro data from Germany. While bringing the model to the data, I find evidence of substantial variation in human capital growth across establishments that is also related to establishment characteristics designed to encourage learning. I find that heterogeneity in firm learning environments accounts for 40% of the increase in the cross-sectional earnings variance over the life cycle, and that this mechanism is especially important for young workers.

Keywords: human capital; earnings dynamics; firms; inequality; search; labor markets (search for similar items in EconPapers)
JEL-codes: E24 J24 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2020-08-14, Revised 2023-09
New Economics Papers: this item is included in nep-bec and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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DOI: 10.20955/wp.2020.036

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