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The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany

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  • Stephanie Lluis

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Abstract

This paper analyzes the dynamics of wages and worker mobility within firms with hierarchical structures of job levels. The paper empirically implements the theoretical model proposed by Gibbons and Waldman (1999) that combines the notions of human capital accumulation, job rank assignment based on comparative advantage, and learning about workers' ability. The paper measures the importance of these elements in explaining intra-firm wage and mobility dynamics using survey data from the German Socio-Economic Panel (GSOEP). The use of this data set makes it possible to examine this issue over a large sample of firms and draw conclusions about the common features characterizing firms' wage policy. The GSOEP survey also provides information about workers' job ranks within the firm that is unavailable in most surveys. The results of the estimation are consistent with non-random selection of workers onto the rungs of the firm's job ladder. There is no direct evidence of learning about workers' unobserved ability, but the analysis reveals the unmeasured ability is an important factor driving wage dynamics. Job rank effects remain significant even after controlling for measured and unmeasured characteristics.

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  • Stephanie Lluis, "undated". "The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany," Working Papers 0103, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  • Handle: RePEc:hrr:papers:0103
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    Cited by:

    1. Corinne Langinier & Stephanie Lluis, 2015. "Departure and Promotion of U.S. Patent Examiners: Do Patent Characteristics Matter?," Working Papers 1506, University of Waterloo, Department of Economics, revised Dec 2015.
    2. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30597, University Library of Munich, Germany.
    3. Adrian Chadi & Laszlo Goerke, 2015. "Missing at Work – Sickness-related Absence and Subsequent Job Mobility," IAAEU Discussion Papers 201504, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    4. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2005. "Comparative Advantage, Learning, and Sectoral Wage Determination," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 681-724, October.
    5. Anders Frederiksen & Timothy Halliday & Alexander K. Koch, 2016. "Within- and Cross-Firm Mobility and Earnings Growth," ILR Review, Cornell University, ILR School, vol. 69(2), pages 320-353, March.
    6. ZHANGALIYEVA, Aigerim & NAKABAYASHI, Masaki, 2013. "Legacy of Czar: The Russian Dual System of Schooling and Signaling," ISS Discussion Paper Series (series F) f163, Institute of Social Science, The University of Tokyo, revised 16 Feb 2018.
    7. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
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    10. Michael Waldman, 2012. "Theory and Evidence in Internal Labor Markets," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
    11. Stéphanie Lluis & Jean Abraham, 2013. "The Wage–Health Insurance Trade-off and Worker Selection: Evidence From the Medical Expenditure Panel Survey 1997 to 2006," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(2), pages 541-581, April.
    12. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    13. Ana Ferrer & Stéphanie Lluis, 2008. "Should Workers Care about Firm Size?," ILR Review, Cornell University, ILR School, vol. 62(1), pages 104-125, October.
    14. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1513-1548, October.
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    16. Robert Gibbons & Michael Waldman, 2006. "Enriching a Theory of Wage and Promotion Dynamics inside Firms," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 59-108, January.
    17. Valerie Smeets & Michael Waldman & Frederic Warzynski, 2013. "Performance, Career Dynamics, and Span of Control," Economics Working Papers 2013-02, Department of Economics and Business Economics, Aarhus University.
    18. Delfgaauw, Josse, 2007. "The effect of job satisfaction on job search: Not just whether, but also where," Labour Economics, Elsevier, vol. 14(3), pages 299-317, June.
    19. NAKABAYASHI, Masaki, 2011. "Acquired Skills and Learned Abilities: Wage Dynamics of Blue-collar Workers in Internal Labor Markets," ISS Discussion Paper Series (series F) f153, Institute of Social Science, The University of Tokyo, revised Apr 2012.
    20. repec:bla:indres:v:56:y:2017:i:3:p:393-410 is not listed on IDEAS
    21. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.

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    Keywords

    wage dynamics; intra-firm mobility; human capital accumulation; unobserved heterogeneity; learning;

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