EconPapers    
Economics at your fingertips  
 

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. I use administrative micro data from Germany to show that different establishments offer systematically different earnings growth rates for their workers. This observation suggests that that the increase in inequality over the life cycle reflects not only inherent worker variation, but also differences in the firms that workers happen to match with over their lifetimes. To quantify this channel, 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 find that heterogeneity in firm learning environments account for 40% of the increase in cross-sectional earnings variance over the life cycle, and that this mechanism is especially important for young workers. I then show that differences in labor market histories partially shape the worker-specific income profiles estimated by reduced-form statistical earnings processes. Finally, because young workers do not fully internalize the benefits of matching to high-growth firms, changes to the structure of unemployment insurance policies can incentivize these workers to search for better matches.

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: 79 pages
Date: 2020-08-14, Revised 2021-01-28
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 (5) Track citations by RSS feed

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2020/2020-036.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:88971

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2020.036

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 ().

 
Page updated 2022-01-27
Handle: RePEc:fip:fedlwp:88971