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Career Choice and Wage Growth

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  • Ronni Pavan

    ()
    (Economics University of Rochester)

Abstract

This paper develops and estimates a search model in which career-specific and firm-specific matches determine job mobility and wage growth. Each worker-firm and worker-career relationship is characterized by a match that evolves stochastically over time. At each period, a worker has three options. He can: 1) stay at his current firm, 2) draw a new firm-specific match by changing employer or 3) change career by drawing a new career and firm-specific match. I calculate the likelihood function treating the model as a non-Gaussian state-space model where the unobserved state variables are the firm and career matches and the non-gaussianity is due to the selection process. I use the structural estimates to calculate ex-ante and ex-post returns to firm tenure or career experience. The implied estimates of the returns are different from the estimates that I would find using standard IV techniques. In order to understand the causes of these differences, I show that these IV techniques are not able to consistently estimate the parameters of a search model like the one presented in this paper.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 504.

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Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:504

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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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Related research

Keywords: Career choice; wage growth; structural estimation; job mobility;

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References

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  1. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
  2. Nathaniel Baum-Snow & Ronni Pavan, 2010. "Understanding the city size wage gap," Working Papers 2010/27, Institut d'Economia de Barcelona (IEB).
  3. Shintaro Yamaguchi, 2011. "Tasks and Heterogeneous Human Capital," Department of Economics Working Papers 2011-06, McMaster University.
  4. Alexandros Zangelidis, 2008. "Occupational And Industry Specificity Of Human Capital In The British Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 420-443, 09.
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