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Mobility and Stability: The Dynamics of Job Change in Labor Markets

Author

Listed:
  • Henry S. Farber

    (Princeton University)

Abstract

Three central facts describe inter-firm worker mobility in modern labor markets: 1) long-term employment relationships are common, 2) most new jobs end early, and 3) the probability of a job ending declines with tenure. Models based on firm-specific capital provide a parsimonious explanation for these facts, but it also appears that worker heterogeneity in mobility rates can account for much of what we observe in these data. I investigate tests of the specific capital model and consider whether these tests are successful in distinguishing the specific capital model from a model based on heterogeneity. One approach uses longitudinal data with detailed mobility histories of workers. These analyses suggest that both heterogeneity and specific capital (implying true duration dependence in the hazard of job ending) appear to be significant factors in accounting for mobility patterns. A second approach is through estimation of the return to tenure in earnings functions. This is found to have several weaknesses including endogeneity of tenure and the lack of tight theoretical links between tenure and accumulated specific capital and between productivity and wages. A third approach is to use of data on the earnings experience of displaced workers. Several tests are derived based on these data, but there is generally an alternative heterogeneity-based explanation that makes interpretation difficult. Nonetheless, firms appear willing to pay to encourage long-term employment relationships, and they may do so because it is efficient to invest in their workforce. On this basis, I conclude that, while deriving convincing direct evidence for the specific capital model of mobility is difficult, it appears that specific capital is a useful construct for understanding worker mobility and wage dynamics.

Suggested Citation

  • Henry S. Farber, 1998. "Mobility and Stability: The Dynamics of Job Change in Labor Markets," Working Papers 779, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:400
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    Citations

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    Cited by:

    1. Ana Lamo & Julian Messina & Etienne Wasmer, 2006. "Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement," Working Papers hal-03459097, HAL.
    2. H. J. Holzer & R. J. LaLonde, "undated". "Job Change and Job Stability among Less-Skilled Young Workers," Institute for Research on Poverty Discussion Papers 1191-99, University of Wisconsin Institute for Research on Poverty.
    3. Gueorgui Kambourov & Iourii Manovskii, 2000. "Occupational Mobility and Wage Inequality, Second Version," PIER Working Paper Archive 04-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 15 Jun 2004.
    4. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Post-Print hal-01053160, HAL.
    5. Carlos Henrique Corseuil & Miguel Foguel & Gustavo Gonzaga & Eduardo Pontual Ribeiro, 2014. "Youth Turnover in Brazil: Job and Worker Flows and an Evaluation of a Youth-Targeted Training Program," CEDLAS, Working Papers 0155, CEDLAS, Universidad Nacional de La Plata.
    6. Maciej Bukowski & Piotr Lewandowski, 2005. "Assessing flows out of employment in Poland: evidence from multinomial logit analysis," Labor and Demography 0511007, University Library of Munich, Germany, revised 30 Nov 2005.
    7. Angel Calderon Madrid, 2000. "Job Stability and Labor Mobility in Urban Mexico: A Study Based on Duration Models and Transition Analysis," Research Department Publications 3117, Inter-American Development Bank, Research Department.
    8. Maciej Bukowski & Piotr Lewandowski, 2005. "Transitions from unemployment in Poland: a multinomial logit analysis," Labor and Demography 0511008, University Library of Munich, Germany, revised 19 Dec 2005.
    9. Marjorie L. Baldwin & Edward J. Schumacher, "undated". "Job Mobility among Workers with Disabilities," Working Papers 9805, East Carolina University, Department of Economics.
    10. repec:spo:wpecon:info:hdl:2441/9938 is not listed on IDEAS
    11. Mertens, Antje, 1999. "Job stability trends and labor market (re-)entry in West Germany 1984 - 1997," SFB 373 Discussion Papers 1999,60, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    12. repec:hal:spmain:info:hdl:2441/9938 is not listed on IDEAS
    13. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 731-759.
    14. Gustavo Gonzaga & Carlos Corseuil & Miguel Foguel & Eduardo Ribeir, 2014. "Youth Labor Market In Brazil Through The Lens Of The Flow Approach," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 234, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    15. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Post-Print hal-01053160, HAL.
    16. Peter AUER & Janine BERG & Ibrahim COULIBALY, 2005. "Is a stable workforce good for productivity?," International Labour Review, International Labour Organization, vol. 144(3), pages 319-343, September.
    17. repec:hal:wpspec:info:hdl:2441/9938 is not listed on IDEAS
    18. Yoguel, Gabriel & Castillo, Victoria & Novick, Marta & Rojo Brizuela, Sofía, 2006. "Labour mobility in Argentina since the mid-1990s: the hard road back to formal employment," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.

    More about this item

    Keywords

    inter-firm worker mobility; employment relationships; firm-specific capital;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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