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Inter-Industry Wage Differentials and Job Flows

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Author Info

  • Krause, M.U.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-3.

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

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Web page: http://center.uvt.nl

Related research

Keywords: job destruction; training; wage differentials; job search; matching;

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References

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  1. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  2. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Universite de Montreal, Departement de sciences economiques.
  3. Belzil, Christian, 2000. "Job Creation and Job Destruction, Worker Reallocation, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 183-203, April.
  4. repec:fth:coluec:465 is not listed on IDEAS
  5. Lisa M. Lynch & Sandra E. Black, 1998. "Beyond the incidence of employer-provided training," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(1), pages 64-81, October.
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  16. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
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  18. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
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