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On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data

Author

Listed:
  • Rasmus Lentz

    (University of Wiscons in-Madison)

  • Suphanit Piyapromdee

    (University College London)

  • Jean-Marc Robin

    (University College London)

Abstract

In this paper, we develop a model of wage dynamics and employment mobility with unrestricted interactions between worker and firm unobserved characteristics in both wages and employment mobility. We adopt the finite mixture approach of Bonhomme et al. (2017). The model is estimated on Danish matched employer-employee data for the period 1985-2013. The estimation includes gender, education, age, tenure and time controls. We find significant sorting on wages and it is stable over the period. Sorting is established early in careers, increasing during the first decade after which it declines steadily. Job-to-job mobility displays a ?mean-reverting? pattern that maintains correlations between worker and firm types to a stationary level. Counterfactuals demonstrate that sorting is primarily driven by two channels: First, a ?preference? channel whereby higher wage workers are more likely to accept jobs in higher wage firms. Second, a job finding channel where the job destination distribution out of non-employment is stochastically increasing in the wage type of the worker.

Suggested Citation

  • Rasmus Lentz & Suphanit Piyapromdee & Jean-Marc Robin, 2018. "On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data," PIER Discussion Papers 91, Puey Ungphakorn Institute for Economic Research, revised Aug 2018.
  • Handle: RePEc:pui:dpaper:91
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Fatih Karahan & Serdar Ozkan & Jae Song, 2019. "Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital," Staff Reports 908, Federal Reserve Bank of New York.
    2. Koen Jochmans & Martin Weidner, 2019. "Fixed‐Effect Regressions on Network Data," Econometrica, Econometric Society, vol. 87(5), pages 1543-1560, September.
    3. Lochner, Benjamin & Schulz, Bastian, 2020. "Firm productivity, wages, and sorting," IAB Discussion Paper 202004, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Christopher Taber & Rune Vejlin, 2020. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," Econometrica, Econometric Society, vol. 88(3), pages 1031-1069, May.
    5. Stéphane Bonhomme & Kerstin Holzheu & Thibaut Lamadon & Elena Manresa & Magne Mogstad & Bradley Setzler, 2020. "How Much Should we Trust Estimates of Firm Effects and Worker Sorting?," Working Papers 2020-77, Becker Friedman Institute for Research In Economics.
    6. Alex Xi He & John Kennes & Daniel le Maire, 2018. "Complementarity and Advantage in the Competing Auctions of Skills," Economics Working Papers 2018-10, Department of Economics and Business Economics, Aarhus University.
    7. Brendan Moore & Judith Scott-Clayton, 2019. "The Firm's Role in Displaced Workers' Earnings Losses," NBER Working Papers 26525, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Heterogeneity; Wage Distributions; Employment and Job Mobility; Matched Employer-employee Data; Finite Mixtures; EM Algorithm; Classification Algorithm; Sorting; Decomposition of Wage Inequality;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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