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The Job Ladder and its Implications for Earnings Risk

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  • Joachim Hubmer

    (Yale University)

Abstract

This paper analyzes the ability of a job ladder framework to explain recent evidence on earnings risk. Heterogeneous and risk averse workers search for job opportunities at heterogeneous firms. The resulting dynamics can successfully replicate several non-targeted key properties of the distribution of earnings changes that have been documented by Guvenen, Karahan, Ozkan and Song [2015]. These are most notably a large negative skewness and a high excess kurtosis, rejecting the frequently used log-normal framework. Moreover, the proposed model is to a certain extent successful in explaining variation in these moments as a function of age and the level of earnings.

Suggested Citation

  • Joachim Hubmer, 2016. "The Job Ladder and its Implications for Earnings Risk," 2016 Meeting Papers 162, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:162
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Fujita, Shigeru & Moscarini, Giuseppe & Postel-Vinay, Fabien, 2020. "Measuring Employer-to-Employer Reallocation," IZA Discussion Papers 13472, Institute of Labor Economics (IZA).
    2. Ana Sofia Pessoa, 2021. "Earnings Dynamics in Germany," CESifo Working Paper Series 9117, CESifo.
    3. Tristan Potter & Dan Bernhardt, 2022. "Wage offers and on‐the‐job search," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 74-105, February.
    4. Jovanovic, Boyan & Prat, Julien, 2021. "Reputation and earnings dynamics," Journal of Economic Theory, Elsevier, vol. 191(C).
    5. Joseph Altonji & Disa Hynsjo & Ivan Vidangos, 2023. "Individual Earnings and Family Income: Dynamics and Distribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 225-250, July.
    6. 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.
    7. McKay, Alisdair, 2017. "Time-varying idiosyncratic risk and aggregate consumption dynamics," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 1-14.
    8. Hoffmann, Eran B. & Malacrino, Davide, 2019. "Employment time and the cyclicality of earnings growth," Journal of Public Economics, Elsevier, vol. 169(C), pages 160-171.
    9. Fatih Guvenen & Fatih Karahan & Serdar Ozkan & Jae Song, 2021. "What Do Data on Millions of U.S. Workers Reveal About Lifecycle Earnings Dynamics?," Econometrica, Econometric Society, vol. 89(5), pages 2303-2339, September.
    10. Storesletten, Kjetil & Halvorsen, Elin & Holter, Hans & Ozkan, Serdar, 2020. "Dissecting Idiosyncratic Earnings Risk," CEPR Discussion Papers 15395, C.E.P.R. Discussion Papers.
    11. Felipe Alves, 2022. "Job Ladder and Business Cycles," Staff Working Papers 22-14, Bank of Canada.
    12. Niklas Engbom, 2018. "Firm and Worker Dynamics in an Aging Labor Market," 2018 Meeting Papers 1009, Society for Economic Dynamics.
    13. Leth-Petersen, Søren & Caplin, Andrew & Gregory, Victoria & Lee, Eungik & Sæverud, Johan, 2023. "Subjective Earnings Risk," CEPR Discussion Papers 17987, C.E.P.R. Discussion Papers.
      • Andrew Caplin & Victoria Gregory & Eungik Lee & Soeren Leth-Petersen & Johan Saeverud, 2023. "Subjective Earnings Risk," CEBI working paper series 23-01, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
      • Andrew Caplin & Victoria Gregory & Eungik Lee & Soren Leth-Petersen & Johan Sæverud, 2023. "Subjective Earnings Risk," Working Papers 2023-003, Federal Reserve Bank of St. Louis, revised 04 Jan 2024.
      • Andrew Caplin & Victoria Gregory & Eungik Lee & Søren Leth-Petersen & Johan Sæverud, 2023. "Subjective Earnings Risk," NBER Working Papers 31019, National Bureau of Economic Research, Inc.
    14. Audra Bowlus & Émilien Gouin‐Bonenfant & Huju Liu & Lance Lochner & Youngmin Park, 2022. "Four decades of Canadian earnings inequality and dynamics across workers and firms," Quantitative Economics, Econometric Society, vol. 13(4), pages 1447-1491, November.
    15. Boyan Jovanovic & Julien Prat, 2018. "Reputation Cycles and Earnings Dynamics," NBER Working Papers 25252, National Bureau of Economic Research, Inc.
    16. Kuhn, Moritz & Ploj, Gasper, 2020. "Job Stability, Earnings Dynamics, and Life-Cycle Savings," IZA Discussion Papers 13887, Institute of Labor Economics (IZA).
    17. Kaas, Leo & Lalé, Etienne & Siassi, Nawid, 2023. "Job Ladder and Wealth Dynamics in General Equilibrium," IZA Discussion Papers 16664, Institute of Labor Economics (IZA).
    18. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    19. Ellora Derenoncourt & Chi Hyun Kim & Moritz Kuhn & Moritz Schularick, 2023. "Unemployment Risk, Portfolio Choice, and the Racial Wealth Gap," ECONtribute Discussion Papers Series 265, University of Bonn and University of Cologne, Germany.
    20. Carlos Carrillo-Tudela & Ludo Visschers & David Wiczer, 2022. "Cyclical Earnings, Career and Employment Transitions," CESifo Working Paper Series 9990, CESifo.
    21. Eran B. Hoffmann & Mr. Davide Malacrino, 2018. "Employment Time and the Cyclicality of Earnings Growth," IMF Working Papers 2018/115, International Monetary Fund.

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    More about this item

    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
    • 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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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