Wage Risk and the Value of Job Mobility in Early Employment Careers

49 Pages Posted: 4 Sep 2015

See all articles by Kai Liu

Kai Liu

Norwegian School of Economics (NHH)

Abstract

This paper shows that job mobility is a valuable channel which employed workers use to mitigate bad labor market shocks. I construct and estimate a model of wage dynamics jointly with a dynamic model of job mobility. The key feature of the model is the specification of wage shocks at the worker- firm match level, for workers can respond to these shocks by changing jobs. The model is estimated using a sample of young male workers from the 1996 panel of Survey of Income and Program Participation. The first result is that the variance of match-level shocks is large, and the consequent value of job mobility is substantial. The second result is that true wage risk is almost three times as large as the wage variance observed after job mobility, which is what other papers in the literature have called wage risk. This suggests a very different picture of the risks facing employed workers in the labor market.

Keywords: job mobility, wage dynamics, wage risk, employment

JEL Classification: D91, J31, J62

Suggested Citation

Liu, Kai, Wage Risk and the Value of Job Mobility in Early Employment Careers. IZA Discussion Paper No. 9256. Available at SSRN: https://ssrn.com/abstract=2655296

Kai Liu (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen
Norway

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