Worker Flows and Wage Growth over the Life-Cycle: A Cross-Country Analysis

Using panel data for 1990–2014 from 12 OECD countries, I document three facts about cross country labor market outcomes. First, worker flows and life-cycle wage growth differ substan- tially across countries. Second, the fluidity of a country’s labor market covaries positively with life-cycle wage growth of its workers. Third, the direct effect of job shopping accounts for only a quarter of this covariation. I build an equilibrium life-cycle model of the labor market that features search and human capital accumulation on the job, showing that a faster rate of climb- ing the job ladder increases incentives to accumulate human capital. A calibrated version of the model suggests that differences in the cost to firms of hiring may account for the empirical covariation between fluidity and wage growth, the empirical covariation between fluidity and output per capita, and 43–45 percent of the overall variation in these measures.