A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation

Jean-Marc Robin, Francois Fontaine, Fabien Postel-Vinay and Jesper Bagger

No 278, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: We present a tractable equilibrium job search model of individual worker careers allowing for human capital accumulation, employer heterogeneity and individual-level shocks. We estimate our structural model on a panel of Danish matched employer-employee data and use it to analyze the determinants of individual wage dynamics. Our main motivation for doing this is to quantify the respective roles of human capital accumulation coming along with work experience and the forces of labor market competition activated by workers' job search behavior in shaping individual labor earnings dynamics over the life cycle. Our structural model permits a decomposition of monthly wage growth into contributions from human capital accumulation and from job search, within and between job spells. We find that the job-search-related within-job effects dominates between-job effects. In relative terms, human capital accumulation is quantitatively more important for wage growth early in workersâ careers, and its quantitative importance increases in workers' educational attainment. Indeed, human capital accumulation is the primary source for early career wage growth among high-educated workers.

Date: 2011
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Working Paper: A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation (2006)
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