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Inter-industry wage differentials and job flows

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Author Info
Krause, M. (Tilburg University, Center for Economic Research)

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Abstract

The paper explores the relationship between job flows and wages in the U.S. manufacturing sector, where wage differentials for seemingly identical workers and job reallocation rates are shown to be negatively correlated across 3-digit industries. High wage industries have the lowest turnover of jobs, offering more secure employment opportunities. In a regression of wage differentials on industry characteristics, the role of job flows is robust to the inclusion of many variables that typically help explain the wage structure. However, average education in a worker's industry, firm size, and capital-per-employee jointly render the coefficient on industry job flows low and insignificant. To explain these findings, an inter-sectoral equilibrium model of the labor market with endogenous job destruction is developed. Employer-provided training in firm-specific skills provides the necessary mechanism that increases wages when duration and through exogenous differences in skill requirements. The role of average education can then be explained by a complementarity between training and observable ex-ante abilities of workers, so that average education in the regression proxies for the average amount of training that workers receive in an industry.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 3.

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Date of creation: 2002
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Handle: RePEc:dgr:kubcen:20023

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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    Other versions:
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    Other versions:
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    Other versions:
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  13. repec:fth:coluec:465 is not listed on IDEAS
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