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Sources of Wage Growth

Author

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  • Adda, Jérôme
  • Dustmann, Christian

Abstract

This paper investigates the sources of wage growth over the life cycle, where individuals have the possibility to acquire vocational training at the start of their career. Wage growth is determined by sectoral and firm mobility, unobserved ability and the accumulation of human capital. Workers may move between two occupational sectors that require cognitive-abstract (CA) and routine-manual (RM) skills, and job mobility is induced by non-pecuniary job attributes and persistent firm-worker productivity matches. Estimating this model using longitudinal administrative data over three decades, we show that RM skills are a key driver of early wage growth while CA skills become important later on. Moreover, job amenities are an important determinant of mobility decisions. Vocational training has long term effects on career outcomes, affecting the type and quality of matches, with substantial internal rates of return both to the individual as well as society.

Suggested Citation

  • Adda, Jérôme & Dustmann, Christian, 2022. "Sources of Wage Growth," CEPR Discussion Papers 17564, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17564
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    Cited by:

    1. Burdin, Gabriel & Garcia-Louzao, Jose, 2023. "Employee-Owned Firms and the Careers of Young Workers," IZA Discussion Papers 15880, Institute of Labor Economics (IZA).
    2. Arellano-Bover, Jaime & Saltiel, Fernando, 2021. "Differences in On-the-Job Learning across Firms," IZA Discussion Papers 14473, Institute of Labor Economics (IZA).
    3. Albanese, Andrea & Cockx, B. & Dejemeppe, Muriel, 2023. "Long-term effects of hiring subsidies for low-educated unemployed youths," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).

    More about this item

    Keywords

    Wage determination; Learning by doing; Job mobility; Apprenticeship training;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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