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Career Choice and Wage Growth

Ronni Pavan

No 504, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper develops and estimates a search model in which career-specific and firm-specific matches determine job mobility and wage growth. Each worker-firm and worker-career relationship is characterized by a match that evolves stochastically over time. At each period, a worker has three options. He can: 1) stay at his current firm, 2) draw a new firm-specific match by changing employer or 3) change career by drawing a new career and firm-specific match. I calculate the likelihood function treating the model as a non-Gaussian state-space model where the unobserved state variables are the firm and career matches and the non-gaussianity is due to the selection process. I use the structural estimates to calculate ex-ante and ex-post returns to firm tenure or career experience. The implied estimates of the returns are different from the estimates that I would find using standard IV techniques. In order to understand the causes of these differences, I show that these IV techniques are not able to consistently estimate the parameters of a search model like the one presented in this paper.

Keywords: Career choice; wage growth; structural estimation; job mobility (search for similar items in EconPapers)
JEL-codes: C51 J24 J31 J62 (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:504

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