What are the sources of rapid wage growth during a worker's early career? To address this question, I construct and estimate a model of strategic wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and outside option. Workers search for alternative job opportunities on the job and accumulate human capital through learning-by-doing. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition improves the outside option value of the worker, which results in wage growth on the job even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the NLSY 79. The parameter estimates are used to simulate counterfactuals. The results indicate that the improved value of outside option raises wages of ten-year-experienced workers by 13%, which accounts for about a quarter of the wage growth during the first ten years of career. I also find that human capital accumulation affects wage profile not only because it directly changes labor productivity, but also because it alters job search behavior due to low future productivity
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number
54.
Length: Date of creation: 03 Dec 2006 Date of revision: Handle: RePEc:red:sed006:54
Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christian Zimmermann).
Find related papers by JEL classification: J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Milton Harris & Bengt Holmstrom, 1981.
"A Theory of Wage Dynamics,"
Discussion Papers
488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)