On-the-job Search, Productivity Shocks, and the Individual Earnings Process

Fabien Postel-Vinay and Hélène Turon

No 5, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: Individual labor earnings observed in worker panel data have complex, highly persistent dynamics. We investigate the capacity of a structural job search model with i.i.d. productivity shocks to replicate salient properties of these dynamics, such as the covariance structure of earnings, the evolution of individual earnings mean and variance with the duration of uninterrupted employment, or the distribution of year-to-year earnings changes. Specifically, we show within an otherwise standard job search model how the combined assumptions of on-the-job search and wage renegotiation by mutual consent act as a quantitatively plausible ``internal propagation mechanism'' of i.i.d. productivity shocks into persistent wage shocks. The model suggests that wage dynamics should be thought of as the outcome of a specific acceptance/rejection scheme of i.i.d. productivity shocks. This offers an alternative to the conventional linear ARMA-type approach to modelling earnings dynamics. Structural estimation of our model on a 10-year panel of highly educated British workers shows that our simple framework produces a dynamic earnings structure which is remarkably consistent with the data

Keywords: Job Search; Individual Shocks; Structural Estimation; Covariance Structure of Earnings. (search for similar items in EconPapers)
JEL-codes: J31 J41 (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (12)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: ON-THE-JOB SEARCH, PRODUCTIVITY SHOCKS, AND THE INDIVIDUAL EARNINGS PROCESS (2010)
Working Paper: On-the-job Search, Productivity Shocks, and the Individual Earnings Process (2006)
Working Paper: On-The-Job Search, Productivity Shocks and the Individual Earnings Process (2006)
Working Paper: On-the-Job Search, Productivity Shocks and the Individual Earnings Process (2006)
Working Paper: On-the-job Search, Productivity Shocks, and the Individual Earnings Process (2005)
Working Paper: On-the-job Search, Productivity Shocks, and the Individual Earnings Process (2005)
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:red:sed006:5

Access Statistics for this paper

More papers in 2006 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().