Earnings Instability of Job Stayers and Job Changers

Marco Leonardi

No 946, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: I use the PSID to decompose the rise in wage inequality into a permanent and a transitory component. I consider separately job stayers and job changers. I find that earnings instability (the variance of the transitory component of earnings) increased much more among job changers than among job stayers. I interpret the evidence in a search and matching model with on-the-job search. The increasing variance of the transitory component of earnings is modeled as a mean-preserving spread of the distribution of productivity shocks. The meanpreserving spread induces on-the-job search on a wider range of productivity values. As a result of increased on-the-job search, the variance of the transitory part of earnings increases among job changers. The direction of the change in the transitory variance across job stayers is ambiguous and depends on their composition between non-seekers and on-the-job seekers who did not find a new job.

Keywords: earnings instability; on-the-job search (search for similar items in EconPapers)
JEL-codes: J21 J31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2003-12
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - revised version published in: Economic Inquiry, 2017, 55(1), 260-280

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