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Career Choice and Wage Growth

Author

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  • Ronni Pavan

    (Economics University of Rochester)

Abstract

This paper develops and estimates a search model in which career-specific and firm-specific matches determine job mobility and wage growth. Each worker-firm and worker-career relationship is characterized by a match that evolves stochastically over time. At each period, a worker has three options. He can: 1) stay at his current firm, 2) draw a new firm-specific match by changing employer or 3) change career by drawing a new career and firm-specific match. I calculate the likelihood function treating the model as a non-Gaussian state-space model where the unobserved state variables are the firm and career matches and the non-gaussianity is due to the selection process. I use the structural estimates to calculate ex-ante and ex-post returns to firm tenure or career experience. The implied estimates of the returns are different from the estimates that I would find using standard IV techniques. In order to understand the causes of these differences, I show that these IV techniques are not able to consistently estimate the parameters of a search model like the one presented in this paper.

Suggested Citation

  • Ronni Pavan, 2006. "Career Choice and Wage Growth," 2006 Meeting Papers 504, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:504
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    References listed on IDEAS

    as
    1. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
    2. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1-53.
    3. Alexandros Zangelidis, 2008. "Occupational And Industry Specificity Of Human Capital In The British Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 420-443, September.
    4. Nathaniel Baum-Snow & Ronni Pavan, 2012. "Understanding the City Size Wage Gap," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 88-127.
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    Cited by:

    1. David Comerford & Jose V Rodriguez Mora & Michael J Watts, 2017. "The rise of meritocracy and the inheritance of advantage," Working Papers 1716, University of Strathclyde Business School, Department of Economics.
    2. Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2021. "Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 361-395.
    3. Gervais, Martin & Jaimovich, Nir & Siu, Henry E. & Yedid-Levi, Yaniv, 2016. "What should I be when I grow up? Occupations and unemployment over the life cycle," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 54-70.
    4. Eleanor W. Dillon, 2018. "Risk and Return Trade-Offs in Lifetime Earnings," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 981-1021.
    5. Elisabeth Bublitz, 2018. "Matching skills of individuals and firms along the career path," Oxford Economic Papers, Oxford University Press, vol. 70(2), pages 509-537.
    6. Aspen Gorry, 2016. "Experience and worker flows," Quantitative Economics, Econometric Society, vol. 7(1), pages 225-255, March.
    7. Michele Battisti, 2016. "Individual Wage Growth: The Role of Industry Experience," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(1), pages 40-70, January.
    8. Galindo da Fonseca, João Alfredo & Gallipoli, Giovanni & Yedid-Levi, Yaniv, 2020. "Match quality and contractual sorting," Labour Economics, Elsevier, vol. 66(C).
    9. Paul Sullivan, 2010. "A Dynamic Analysis Of Educational Attainment, Occupational Choices, And Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 289-317, February.
    10. Addison, John T. & Chen, Liwen & Ozturk, Orgul Demet, 2017. "Occupational Match Quality and Gender over Two Cohorts," IZA Discussion Papers 11114, Institute of Labor Economics (IZA).
    11. Josh Kinsler & Ronni Pavan, 2015. "The Specificity of General Human Capital: Evidence from College Major Choice," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 933-972.
    12. David J Deming & Kadeem Noray, 2020. "Earnings Dynamics, Changing Job Skills, and STEM Careers," The Quarterly Journal of Economics, Oxford University Press, vol. 135(4), pages 1965-2005.
    13. Brian Clark & Clément Joubert & Arnaud Maurel, 2017. "The career prospects of overeducated Americans," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-29, December.
    14. Jean-Marc Robin & Costas Meghir & Christian Dustmann & Jerome Adda, 2013. "Career Progression, Economic Downturns, and Skills," 2013 Meeting Papers 993, Society for Economic Dynamics.
    15. Schmutte, Ian M., 2014. "Free to Move? A Network Analytic Approach for Learning the Limits to Job Mobility," Labour Economics, Elsevier, vol. 29(C), pages 49-61.
    16. David Fuller & Damba Lkhagvasuren & Antoine Terracol & Stephane Auray, 2014. "A Dynamic Analysis of Sectoral Mobility, Worker Mismatch, and the Wage-Tenure Profile," 2014 Meeting Papers 876, Society for Economic Dynamics.
    17. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1-53.
    18. Carl Sanders & Christopher Taber, 2012. "Life-Cycle Wage Growth and Heterogeneous Human Capital," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 399-425, July.
    19. David J. Deming, 2021. "The Growing Importance of Decision-Making on the Job," NBER Working Papers 28733, National Bureau of Economic Research, Inc.
    20. Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984-2000," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 387-420, July.
    21. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    22. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    23. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
    24. John T. Addison & Liwen Chen & Orgul D. Ozturk, 2020. "Occupational Skill Mismatch: Differences by Gender and Cohort," ILR Review, Cornell University, ILR School, vol. 73(3), pages 730-767, May.
    25. Zsolt Csáfordi & László Lőrincz & Balázs Lengyel & Károly Miklós Kiss, 2020. "Productivity spillovers through labor flows: productivity gap, multinational experience and industry relatedness," The Journal of Technology Transfer, Springer, vol. 45(1), pages 86-121, February.

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    More about this item

    Keywords

    Career choice; wage growth; structural estimation; job mobility;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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