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Interindustry Mobility and the Cyclical Upgrading of Labor

  • McLaughlin, Kenneth J
  • Bils, Mark

We investigate whether a market-clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor. We demonstrate that Roy's (1951) market-clearing model of self-selection would account for cyclical upgrading if industries were characterized by positive selection. Wage comparisons of industry movers and stayers in panel data do reveal widespread positive selection. Also consistent with the Roy model, composition-corrected industry wages are more cyclical in high-wage cyclical industries. The Roy model does fail to explain predictable patterns in the wage changes of industry movers, so we consider several market-clearing and queuing extensions. Copyright 2001 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/209981
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 19 (2001)
Issue (Month): 1 (January)
Pages: 94-135

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Handle: RePEc:ucp:jlabec:v:19:y:2001:i:1:p:94-135
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  1. Wachter, Michael L, 1970. "Cyclical Variation in the Interindustry Wage Structure," American Economic Review, American Economic Association, vol. 60(1), pages 75-84, March.
  2. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
  3. Mark Bils & Peter J. Klenow, 1998. "Using Consumer Theory to Test Competing Business Cycle Models," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 233-261, April.
  4. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 823-838.
  5. Heckman, James J & Sedlacek, Guilherme L, 1990. "Self-selection and the Distribution of Hourly Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S329-63, January.
  6. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December.
  7. Robert J. Willis & Sherwin Rosen, 1978. "Education and Self-Selection," NBER Working Papers 0249, National Bureau of Economic Research, Inc.
  8. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
  9. Ian M. McDonald & Robert M. Solow, 1985. "Wages and Employment in a Segmented Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1115-1141.
  10. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  11. Helwege, Jean, 1992. "Sectoral Shifts and Interindustry Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 55-84, January.
  12. Michael P. Keane, 1991. "Individual heterogeneity and interindustry wage differentials," Discussion Paper / Institute for Empirical Macroeconomics 54, Federal Reserve Bank of Minneapolis.
  13. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
  14. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  15. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  16. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
  17. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 500-522, October.
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