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

Author

Listed:
  • Jean-Marc Robin

    (Sciences Po Paris)

  • Francois Fontaine

    (University of Strasbourg)

  • Fabien Postel-Vinay

    (University of Bristol)

  • Jesper Bagger

    (Royal Holloway, University of London)

Abstract

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.

Suggested Citation

  • Jean-Marc Robin & Francois Fontaine & Fabien Postel-Vinay & Jesper Bagger, 2011. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2011 Meeting Papers 278, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:278
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    Cited by:

    1. Carrillo-Tudela, Carlos & Kaas, Leo, 2011. "Wage Dispersion and Labor Turnover with Adverse Selection," IZA Discussion Papers 5936, Institute of Labor Economics (IZA).
    2. Kenneth L. Sørensen & Rune Vejlin, 2014. "Return To Experience And Initial Wage Level: Do Low Wage Workers Catch Up?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(6), pages 984-1006, September.
    3. Carlos Carrillo-Tudela, 2010. "Job Search, Human Capital and Wage Inequality," 2010 Meeting Papers 723, Society for Economic Dynamics.
    4. Kenneth Burdett & Carlos Carrillo‐Tudela & Melvyn G. Coles, 2011. "Human Capital Accumulation And Labor Market Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 657-677, August.
    5. Danny Leung & Alexander Ueberfeldt, 2008. "Human Capital Risk and the Firmsize Wage Premium," Staff Working Papers 08-33, Bank of Canada.
    6. Liu, Kai, 2015. "Wage Risk and the Value of Job Mobility in Early Employment Careers," IZA Discussion Papers 9256, Institute of Labor Economics (IZA).
    7. Sarah Le Duigou, 2012. "L'effet de l'âge sur la distribution des salaires," Revue française d'économie, Presses de Sciences-Po, vol. 0(1), pages 163-185.
    8. Christopher Taber & Rune Vejlin, 2020. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," Econometrica, Econometric Society, vol. 88(3), pages 1031-1069, May.
    9. Xiao, Chaoqun & Tang, Wansheng & Zhao, Ruiqing & Zhou, Chi, 2013. "Equilibrium search with heterogeneous firms, workers and endogenous human capital," MPRA Paper 52136, University Library of Munich, Germany.
    10. Flabbi, Luca & Leonardi, Marco, 2010. "Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market," European Economic Review, Elsevier, vol. 54(6), pages 832-854, August.
    11. Theodore Papageorgiou, 2009. "Learning Your Comparative Advantages," 2009 Meeting Papers 1150, Society for Economic Dynamics.
    12. Julien Prat, 2010. "The rate of learning-by-doing: estimates from a search-matching model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(6), pages 929-962.
    13. Sarah Le Duigou, 2012. "Effect of Age on the Wage Distribution: A Quantitative Evaluation Using US Data," Working Papers halshs-00856225, HAL.
    14. Jesper Bagger & Morten Henningsen, 2008. "Job Durations and the Job Search Model: A Two-Country, Multi-Sample Analysis," Discussion Papers 553, Statistics Norway, Research Department.
    15. Chao Fu, 2011. "Training, Search and Wage Dispersion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 650-666, October.
    16. Ken Burdett & Melvyn Coles, 2010. "Tenure and Experience Effects on Wages: A Theory," CESifo Working Paper Series 3203, CESifo.

    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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