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Labor Market Dynamics: A Model of Search and Human Capital Accumulation

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  • Gregory Veramendi

    (Northwestern University)

Abstract

Informed by new measurements of labor market dynamics, I develop and estimate an equilibrium search model of worker mobility. I first describe new facts about the dynamics of wages across unemployment spells in Denmark. This implies that the job-ladder search model cannot by itself explain all the observed movements of workers between firms. I construct a new model of worker mobility which combines search and human capital accumulation. Workers in the model accumulate skills via learning-by-doing which has decreasing returns for a given job. Workers must either be promoted or find a job at a new firm in order to continue learning new skills. I show that by including this incentive to change jobs, career development not only helps explain wage dispersion, but also contributes to a more complete understanding of labor market dynamics. I structurally estimate the job-ladder search model using matched employer-employee data from Denmark. The estimates show that the job-ladder search model explains less than 10% of the worker mobility seen in the data. In addition, worker heterogeneity explains about 65% of the wage variance for college graduates and about 45% for all other workers.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1059.

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Date of creation: 2012
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Handle: RePEc:red:sed012:1059

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Web page: http://www.EconomicDynamics.org/society.htm
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  6. Jesper Bagger & Francois Fontaine & Jean-Marc Robin, 2014. "Tenure, experience, human capital and wages: a tractable equilibrium search model of wage dynamics," CeMMAP working papers CWP12/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  22. Bunzel, H. & Christensen, B.J. & Kiefer, N.M. & Korsholm, L., 1999. "Equilibrium Search with Human Capital Accumulation," Papers 99-11, Centre for Labour Market and Social Research, Danmark-.
  23. Mary Corcoran & Greg J. Duncan, 1979. "Work History, Labor Force Attachment, and Earnings Differences between the Races and Sexes," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 3-20.
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Cited by:
  1. Jesper Bagger & Francois Fontaine & Jean-Marc Robin, 2014. "Tenure, experience, human capital and wages: a tractable equilibrium search model of wage dynamics," CeMMAP working papers CWP12/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

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