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Earnings Instability of Job Stayers and Job Changers

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  • Leonardi, Marco

    () (University of Milan)

Abstract

I use the PSID to decompose the rise in wage inequality into a permanent and a transitory component. I consider separately job stayers and job changers. I find that earnings instability (the variance of the transitory component of earnings) increased much more among job changers than among job stayers. I interpret the evidence in a search and matching model with on-the-job search. The increasing variance of the transitory component of earnings is modeled as a mean-preserving spread of the distribution of productivity shocks. The meanpreserving spread induces on-the-job search on a wider range of productivity values. As a result of increased on-the-job search, the variance of the transitory part of earnings increases among job changers. The direction of the change in the transitory variance across job stayers is ambiguous and depends on their composition between non-seekers and on-the-job seekers who did not find a new job.

Suggested Citation

  • Leonardi, Marco, 2003. "Earnings Instability of Job Stayers and Job Changers," IZA Discussion Papers 946, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp946
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    References listed on IDEAS

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    Cited by:

    1. Flabbi, Luca & Leonardi, Marco, 2010. "Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market," European Economic Review, Elsevier, vol. 54(6), pages 832-854, August.
    2. Lorenzo Cappellari & Marco Leonardi, 2016. "Earnings Instability and Tenure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(2), pages 202-234, April.
    3. María Cervini-Plá & Xavier Ramos, 2012. "Long-Term Earnings Inequality, Earnings Instability and Temporary Employment in Spain: 1993–2000," British Journal of Industrial Relations, London School of Economics, vol. 50(4), pages 714-736, December.

    More about this item

    Keywords

    earnings instability; on-the-job search;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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