Career Choice and Wage Growth
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.
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- 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.
- Shintaro Yamaguchi, 2011.
"Tasks and Heterogeneous Human Capital,"
Department of Economics Working Papers
2011-06, McMaster University.
- 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, 09.
- 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.
- Audra J. Bowlus & Huju Liu, 2012. "The Contributions of Search and Human Capital to Earnings Growth Over the Life Cycle," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20122, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
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