Workplace Heterogeneity and the Returns to Versatility
21 Pages Posted: 25 Jul 2015 Last revised: 17 May 2021
Date Written: May 17, 2021
In the canonical random on-the-job search model with continuous firm heterogeneity, I show that a mean-preserving spread of the firm-productivity distribution raises the returns to mobility, i.e., the inter-firm mobility of workers as measured by the number of outside contacts per employment spell. Both sorting and rent-share mechanisms play a role. In a further contribution, I distinguish frictional and structural impediments to mobility in order to establish a link between mobility and skills via the concept of versatility. Versatility enhances a person’s mobility since a mismatch between job requirements and the person’s skill set is less likely to occur. I provide some statistics in support of the discussed mechanisms. The findings are particularly intriguing in light of the concurrent rise in the productivity dispersion across firms and in the skill premium in many countries.
Keywords: multidimensional skills, versatility, workplace heterogeneity, productivity dispersion, search and matching, on-the-job search, job mobility, skill premium, wage inequality
JEL Classification: J22, J24, J31, J62, J63, I26, E24
Suggested Citation: Suggested Citation