A Dynamic Analysis of Sectoral Mobility, Worker Mismatch, and the Wage-Tenure Profile

David Fuller, Damba Lkhagvasuren, Antoine Terracol and Stéphane Auray

No 876, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: A dynamic multi-sector model with both net and excess mobility is developed to quantify the determinants of the canonical increasing wage-tenure profile. The model distinguishes between three potential factors: sector-specific skill accumulation, sector-specific shocks, and dynamic worker-sector mismatch shocks. The sector-specific skill premium drives the observed negative correlation between life-time earnings and mobility. Excess mobility driven by worker-sector mismatch shocks explains nearly 20 percent of the observed wage growth for recent movers. Ignoring dynamic worker-sector mismatch leads to biased estimates of the sector-specific skill premium. Sectoral shocks have a negligible impact on wages and mobility.

Date: 2014
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Working Paper: A Dynamic Analysis of Sectoral Mobility, Worker Mismatc and the Wage-Tenure Profiles (2014)
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