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A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation

Listed author(s):
  • Jean-Marc Robin

    (Sciences Po Paris)

  • Francois Fontaine

    (University of Strasbourg)

  • Fabien Postel-Vinay

    (University of Bristol)

  • Jesper Bagger

    (Royal Holloway, University of London)

We present a tractable equilibrium job search model of individual worker careers allowing for human capital accumulation, employer heterogeneity and individual-level shocks. We estimate our structural model on a panel of Danish matched employer-employee data and use it to analyze the determinants of individual wage dynamics. Our main motivation for doing this is to quantify the respective roles of human capital accumulation coming along with work experience and the forces of labor market competition activated by workers' job search behavior in shaping individual labor earnings dynamics over the life cycle. Our structural model permits a decomposition of monthly wage growth into contributions from human capital accumulation and from job search, within and between job spells. We find that the job-search-related within-job effects dominates between-job effects. In relative terms, human capital accumulation is quantitatively more important for wage growth early in workersâ careers, and its quantitative importance increases in workers' educational attainment. Indeed, human capital accumulation is the primary source for early career wage growth among high-educated workers.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 278.

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Date of creation: 2011
Handle: RePEc:red:sed011:278
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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