job mobility and wage dynamics
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Job Mobility and Wage Dynamics. Valerie Smeets Very preliminary – comments welcome Prepared for the Internal Seminar UC3M. Motivation. Job transitions (patterns) and wages Common framework is search and matching models Able workers should match with better jobs (Becker, 1973) - PowerPoint PPT PresentationTRANSCRIPT
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Job Mobility and Wage Dynamics
Valerie SmeetsVery preliminary – comments welcome
Prepared for the Internal Seminar UC3M
2
Motivation Job transitions (patterns) and wages Common framework is search and
matching models Able workers should match with better jobs
(Becker, 1973) Workers change jobs to improve their match Switching decision may be influenced by firm
specific HC and switching costs Firm specific HC destroyed for switchers Workers with more firm specific human capital
and better matches are less likely to leave
3
Motivation (cont´d) Number of past jobs
Ambiguous predictions about cross sectional correlation between the number of jobs a worker has held and his match quality
1. Workers who remain at their job for a long time have high matches while those who switch firms have low matches # past jobs negatively related to wages
2. Workers take better matches at other firms as a substitute for acquiring specific capital # past jobs positively related to wages
4
Literature
Job seniority and wages Large returns to firm tenure (2 to 3% per year) Unobserved heterogeneity lead to biased
returns estimates (Abraham and Farber (1987), Altonji and Shakotko (1987), Topel (1991), Abowd, Kramarz and Margolis (1999))
The large firm tenure coefficients go away when industry, occupational or career tenure are included (Neal (1995), Kambourov and Manovskii (2002) and Pavan (2005))
5
Job mobility and wages Mincer (1986)
Short and long run wage gains from separations PSID, 1970-1981 (all ages) Positive wage gains in the short run Movers never catch up higher wage of stayers
(flatter life time trajectories) Abowd, Kramartz and Roux (2006), Buchinsky,
Fougere, Kramarz and Tchernis (2003) Wage and mobility (firm policies, firm
performance) French matched employer-employee data Includes # firm changes (more) to control for
bias in worker heterogeneity wrt previous employment
6
Job changes patterns and wages Mincer-Jovanovic (1981)
National Longitudinal Survey 1966-1976 No effect of past firm changes for young
workers Negative effect for old workers
Light and McGarry (1998) NLSY (1979-1993), young white men only
(8 first years of career) Positive or no effect of # firm changes in
first 2 years, negative effect of total # changes overall
Extremely small effects
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Outline
1. Estimation strategy
2. Data description, sum stats and results
with Danish matched employer-employee
data
3. Verification using US data (NSLY) – brief
data description, sum stats and results
with US data
4. Conclusions
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Estimation model
Correlation of variables with unobserved job or worker characteristics will produce biased OLS estimators of β
itdiidtdtsitc
iteititidtftidt
firmsizesfirmchange
eriencenureindustrytefirmtenurewage
explog 0
noise idi
sticscharacteri fixed firm
sticscharacteri fixed worker
t time in d firm a and i workera btw macth
it
d
i
idt
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Two empirical possibilities (I)
Consistent with costly search model of Jovanovic (1979)
No HC gain to accumulate experience in multiple firms Workers who remain at their job for a long time have
high matches while those who switch firms have low matches
Costly SHC only for workers planning to stay
Firm tenure biased upward and firm changes biased downward (βft > 0 and βc < 0)
0≤ ),cov(0),cov( idtitidtidt sfirmchange and firmtenure
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Two empirical possibilities (II)
Some workers take better matches at other firms as a substitute for acquiring specific human capital
These workers may switch because of low search or switching costs, scare skills or plain luck at securing offers
Firm tenure biased downward and firm changes biased upward (βft < 0 and βc > 0)
0 ),cov(0),cov( idtitidtidt sfirmchange and firmtenure
11
Data - Denmark
Danish Integrated Database for Labor Market Research (IDA) – Statistics DK Matched employer-employee dataset of entire
Danish population (1980-2001) Combination of 3 datasets
Common keys to match them back Individual – personnel characteristics (age,
sex, education, family status, location, occupation, etc.)
Job – plant, industry, location, # jobs, wage, etc., November data
Firms – nbr plants, old ID number, etc.
12
Data - Denmark Sample
Private sector, primary job only Workers aged 25 to 44
25 - Avoid students 45 - Data limitations in computation of labor
history variables 2001 cross section and 1996-2001 panel 731,358 individuals or 4,314,813 data year
Controls Education (4 groups), part time, female, firm
size, industry dummies, firm and worker fixed effect
13
Data - Denmark Human capital variables
Experience – computed back to 1969 by Stat DK Firm tenure – using 1980-2001 history Industry tenure - using 1980-2001 history
Firm changes variables # past firm changes after last graduation Decompose firm changes into exits and non
exits Intervals for firm changes [1-2, 3-5, 6-9, 10 up]
to check for non linearity Disaggregate exits and non exits by two age
intervals: 25-34 and 35-44
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Demographic Variables Full time workers Part time workers
Age 34.5 34.1
Female 0.25 0.44
Vocational 0.56 0.58
Community college 0.13 0.17
College & masters 0.04 0.06
Labor Market History Variables Full time workers Part time workers
Experience 13.0 11.7
Firm tenure 4.6 3.2
Industry tenure 6.0 5.0
# firm changes after graduation 3.00 3.02
# exits after graduation 0.77 0.81
# exits - age 25/ 34 0.41 0.45
# exits - age 35/ 44 0.09 0.12
# non exits after graduation 2.23 2.21
# non exits - age 25/ 34 1.12 1.17
# non exits - age 35/ 44 0.28 0.35
# observations 319,003 412,355
Workers (25 to 44 years old in 2001)DANISH DATA - Demographic Variables
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Variables Agriculture Manufacture Construction Retail Finance
Full time 0.55 0.56 0.47 0.35 0.31
Female 0.27 0.33 0.21 0.42 0.45
Firm tenure 3.3 4.4 3.4 3.6 3.3
Industry tenure 5.0 5.4 5.5 5.5 5.2
# firm changes 3.0 2.9 3.5 2.9 2.6
# observations 16,413 230,775 159,144 187,951 149,496
Full time 0.57 0.56 0.45 0.36 0.32
Female 0.26 0.34 0.23 0.41 0.46
Firm tenure 3.8 4.4 3.5 3.8 3.4
Industry tenure 5.6 5.4 5.6 5.9 5.5
# firm changes 3.6 3.2 3.9 3.3 2.8
# observations 833 14,525 9,257 10,400 9,388
DANISH DATA - Summary Statistics by IndustryWorkers (25 to 44 years old in 2001)
Workers 35 years old only
16
Histogram of firm changes (after last graduation)
17
Histogram of exits and non exits
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Estimations Wage (log) on HC variables, firm changes +
controls 2001 sample, men full time, firm worker fixed
effects (1996-2001 sample) Wage (log) on HC variables, exits and non exits
+ controls 2001 sample, men full time, college, college
men, manufacture, non manufacture Wage growth (log) on HC variables, firm
changes and controls 1996-2001 sample, men full time, college,
2001 and 1996 firm fixed effects
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Firm Panel
fixed effect 1996-2001
0.022*** -0.00001 0.005*** 0.0001 0.017*** -0.003**
(0.001) (0.002) (0.002) (0.003) (0.002) (0.0004)
0.040*** -0.006*** 0.006*** 0.001 0.035*** 0.013***
(0.001) (0.002) (0.002) (0.003) (0.002) (0.001)
0.040*** -0.016*** 0.002 -0.005 0.039*** 0.029***
(0.001) (0.002) (0.002) (0.003) (0.002) (0.001)
0.020*** -0.039*** -0.007*** -0.009*** 0.032*** 0.049***
(0.002) (0.002) (0.002) (0.003) (0.002) (0.001)
0.033*** 0.032*** -0.009*** 0.024*** 0.002***
(0.002) (0.002) (0.003) (0.002) (0.001)
0.069*** 0.068*** 0.021*** 0.058*** 0.014***
(0.002) (0.002) (0.003) (0.002) (0.001)
0.086*** 0.087*** 0.046*** 0.081*** 0.014***
(0.002) (0.002) (0.003) (0.002) (0.001)
0.094*** 0.97*** 0.060*** 0.097*** 0.012***
(0.002) (0.002) (0.003) (0.002) (0.001)
0.018*** 0.015*** 0.001 0.172***
(0.002) (0.002) (0.002) (0.001)
0.042*** 0.039*** 0.018*** 0.220***
(0.002) (0.002) (0.002) (0.001)
0.061*** 0.058*** 0.029*** 0.236***
(0.002) (0.003) (0.002) (0.002)
0.068*** 0.068*** 0.030*** 0.227***
(0.002) (0.003) (0.002) (0.002)
730,492 730,492 730,492 240,005 730,492 4,314,813
0.27 0.27 0.27 0.28 0.49 0.78
DANISH DATA - Wages and Past Firm Changes
Dept. Variable:
Log of Hourly Wage (1) (2) (3) Men - Full time
FIR
M T
ENU
RE
1 to 2
3 to 5
6 to 9
10 and up
-
IND
UST
RY
TEN
UR
E
1 to 2 -
3 to 5 -
6 to 9 -
10 and up -
-
FIR
M C
HA
NG
ES
1 to 2 - -
3 to 5 - -
6 to 9 -
# observations
R²
10 and up -
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All Full time College+ Non
sample men Men Manufacture
-0.006*** -0.013*** 0.019*** 0.011*** -0.013*** -0.003***
(0.001) (0.001) (0.002) (0.003) (0.001) (0.001)
-0.023*** -0.020*** 0.006 0.022*** -0.032*** -0.019***
(0.001) (0.002) (0.004) (0.005) (0.002) (0.002)
0.017*** 0.014*** 0.036*** 0.040*** 0.011*** 0.019***
(0.0003) (0.001) (0.001) (0.001) (0.001) (0.0004)
0.019*** 0.017*** 0.040*** 0.041*** 0.016*** 0.019***
(0.001) (0.001) (0.002) (0.002) (0.001) (0.001)
730,492 240,005 109,481 72,874 226,671 503,821
0.28 0.28 0.28 0.24 0.29 0.27
DANISH DATA - Wages and Past Firm Changes by Exits vs. Non Exits
Dept. Variable: Log of Hourly Wage
College+ Manufacture
FIR
M C
HA
NG
ES
# exits btw 25/ 35
# exits btw 35/ 45
# non exits btw 25/ 35
# non exits btw 35/ 45
R²
Controls firm and industry tenure, experience, female, education (3 groups), log of firm size
Fixed effect industry 2 digits
# observations
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All Full time 2001 1996 1996
sample men fixed effect fixed effect fixed effect
0.022*** 0.033*** 0.026*** 0.020*** 0.023*** 0.008***
(0.001) (0.001) (0.003) (0.001) (0.001) (0.001)
Fixed effect 2001 firm 1996 firm 1996 firm
# observations 545,716 196,522 49,687 545,716 545,716 545,716
R² 0.10 0.15 0.10 0.31 0.31 0.31
industry 2 digits
experience, experience² , female, education (3 groups), log of firm size
# firm changes over
1996 - 2001
Controls2001 values for firm and industry tenure
1996 firm &
industry tenure
DANISH DATA - Changes in Wages and Past Firm ChangesPeriod 1996-2001
Dept. Variable:
Log of wage growth College+
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Data - US National Longitudinal Survey of Youth
(NLSY79) Data prepared by Pavan (2005) Computed workers labor history, including firm
tenure, industry tenure and career tenure using NLSY work history files (1978-1994)
Sample 1979-1993 Full time male workers, primary job Men only, age 25 and older [25,37] 1935 individuals or 12,776 data year Older sample than Light and McGarry (1998)
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Data - US Firm changes variables
# past firm changes after age 25 # exits and non exits after age 25 Intervals for firm changes and non exits
Controls Experience, firm tenure, industry tenure,
career tenure, black, education Estimations – log wage
Panel, without and with individual fixed effect # past firm changes, exits and non exits
(intervals)
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Summary statistics – US (NLSY)
Experience 9.2
Firm tenure 4.1
Industry tenure 4.9
Career tenure 5.9
# firm changes 2.50
# firm changes after 25 1.18
# non exits 2.40
# non exits after 25 1.12
# exits 0.11
# exits after 25 0.06
# observations 12,776
Labor Market History Variables
25
Histogram of firm changes (after 25)
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0.073*** 0.076*** 0.061*** 0.121*** 0.117*** 0.130***
(0.014) (0.014) (0.014) (0.018) (0.019) (0.018)
0.034** 0.049*** 0.056*** 0.157*** 0.160*** 0.189***
(0.017) (0.017) (0.016) (0.025) (0.025) (0.025)
-0.040* -0.040* 0.027 0.171*** 0.173*** 0.229***
(0.024) (0.024) (0.024) (0.035) (0.040) (0.036)
0.065*** 0.058*** 0.014** 0.050*** 0.047*** 0.035***
(0.005) (0.005) (0.006) (0.004) (0.005) (0.005)
-0.003*** -0.003*** -0.0006 -0.002*** -0.002*** -0.002***
(0.0003) (0.0004) (0.0004) (0.0003) (0.0003) (0.0003)
0.021*** 0.006
(0.005) (0.004)
-0.0007* 0.0000
(0.0003) (0.0003)
0.083*** 0.032***
(0.005) (0.005)
-0.003*** -0.001***
(0.0004) (0.0003)
Controls
12,776 12,285 12,776 12,776 12,285 12,776
0.22 0.23 0.25 0.70 0.70 0.70
-
- -
- -
-
-
-Industry tenure²
Career tenure
Career tenure²
FIR
M C
HA
NG
ES
-
-
black, education (4 groups), year dummies
-
-
Fixed effect
# observations
no
-
-
R²
worker
4 changes and up
1 change
2 to 3 changes
Firm tenure
Firm tenure²
Industry tenure
-
-
US DATA (NLSY) - Wages and Past Firm Changes
Dept. Variable:
Log of Hourly Wage (1a) (2a) (3b) (1b) (2b) (3b)
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US Data (NLSY) - Wages and Exits vs. Non Exits
-0.061*** -0.031 -0.020 0.041 0.178** 0.065
(0.019) (0.022) (0.018) (0.046) (0.070) (0.046)
0.074*** 0.075*** 0.059*** 0.108*** 0.112*** 0.119***
(0.014) (0.014) (0.013) (0.018) (0.018) (0.018)
0.037** 0.041** 0.051*** 0.148*** 0.157*** 0.180***
(0.016) (0.017) (0.016) (0.024) (0.025) (0.024)
-0.030 -0.031 0.036 0.166*** 0.172*** 0.229***
(0.024) (0.024) (0.024) (0.034) (0.035) (0.035)
12,776 12,285 12,776 12,776 12,285 12,776
0.22 0.23 0.25 0.70 0.70 0.70
Dept. Variable:
Log of Hourly Wage (1a) (2a) (3b) (1b) (2b) (3b)
Fixed effect no worker
FIR
M C
HA
NG
ES
1 exit or more
1 non exit
2 to 3 non exits
4 non exits and up
# observations
R²
Controls
black, education (4 groups), experience, year dummies
firm tenure
firm and
industry
tenure
firm and
occupation
tenure
firm tenure
firm and
industry
tenure
firm and
occupation
tenure
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Conclusions
Denmark Cross section & panel - the effect of past firm
changes increases with the number of changes 2 to 7% in cross section 17 to 23% in panel
US Cross section - Only moving up to 3 times affect
your wage (7-6%,3-6%) Panel - the effect of past firm changes increases
with the number of changes (13 to 23%)
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Conclusions New empirical fact - workers who switch
firms repeatedly in the past earn higher wages
Workers who move end up with better match than workers who do not move
Contredict Mincer- Jovanovic (1981) and Light McGarry (1999) Different groups of workers have different
effect of job transitions patterns on wages
Returns to firm changes dominate returns to SHC effect
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Conclusions Correlation btw firm changes and wage
become very large once workers fixed effects are introduced Some negative selection in the time invariant
ability of workers who switch firms Robust to all specifications
Number of job changes, exits or non exits, age groups, fixed effect
Similar results for Denmark and the US Policy implications for labor market flexibility
31
32
Firm Panel
fixed effect 1996-2001
0.018*** 0.015*** 0.001 0.172***
(0.002) (0.002) (0.002) (0.001)
0.042*** 0.039*** 0.018*** 0.220***
(0.002) (0.002) (0.002) (0.001)
0.061*** 0.058*** 0.029*** 0.236***
(0.002) (0.003) (0.002) (0.002)
0.068*** 0.068*** 0.030*** 0.227***
(0.002) (0.003) (0.002) (0.002)
firm worker
730,492 240,005 730,492 4,314,8130.27 0.28 0.49 0.78
# observationsR²
10 changes and up
Controls
FIR
M C
HA
NG
ES
1 to 2 changes
3 to 5 changes
6 to 9 changes
experience, firm and industry tenure, female, education, log of firm size
industry 2 digit
DANISH DATA - Wages and Past Firm Changes
experience, firm tenure and industry tenure, log firm size,
year dummiers
experience, firm and industry tenure, female,
education
Fixed effect
Men - Full timeDept. Variable: Log of Hourly Wage
Whole sample