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Labor Market Dynamics: A Model of Search and Human Capital Accumulation

Gregory Veramendi ()

No 1059, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: Informed by new measurements of labor market dynamics, I develop and estimate an equilibrium search model of worker mobility. I first describe new facts about the dynamics of wages across unemployment spells in Denmark. This implies that the job-ladder search model cannot by itself explain all the observed movements of workers between firms. I construct a new model of worker mobility which combines search and human capital accumulation. Workers in the model accumulate skills via learning-by-doing which has decreasing returns for a given job. Workers must either be promoted or find a job at a new firm in order to continue learning new skills. I show that by including this incentive to change jobs, career development not only helps explain wage dispersion, but also contributes to a more complete understanding of labor market dynamics. I structurally estimate the job-ladder search model using matched employer-employee data from Denmark. The estimates show that the job-ladder search model explains less than 10% of the worker mobility seen in the data. In addition, worker heterogeneity explains about 65% of the wage variance for college graduates and about 45% for all other workers.

Date: 2012
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More papers in 2012 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.
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