Labor mobility and Inter-industry Wage Variation
This paper offers a new explanation for the empirically observed inter-industry wage variation. We represent an industry by a small open economy with inter-firm labor mobility. Each industry is characterized by a degree of learning-by-doing, learning-by-hiring, inter-firm mobility costs and technological level. In this economy we analyze how these features affect the wage level of the industry. The variety of knowledge within an industry and its capital intensity is also analyzed. Results show that industries with high learning-by-hiring and low mobility costs generally pay higher wages. More learning-by- doing and higher technological level in an industry is also giving higher wages. Results provide new hypotheses to be tested and are consistent with the finding that more capital intensive industries pay higher wages.
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