Do Higher Wages Reduce Knowledge Worker's Job Mobility? Evidence for Swedish Inventors

38 Pages Posted: 11 Dec 2017

See all articles by Olof BA Ejermo

Olof BA Ejermo

CIRCLE; Lund University - Department of Economic History

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung

Date Written: January 2018

Abstract

Based on linked employer‐employee panel data on all Swedish inventors, this paper analyses how wages affect inventors’ job mobility. It is commonly assumed that higher wages reduce mobility because they reduce the value of outside opportunities. We argue that higher wages also send performance signals to potential employers, who raise their wage offers in response. By disentangling the effects of higher wages, we show evidence of a utility and an opportunity cost effect, which reduce mobility, and a performance‐signalling effect, which increases mobility. In our data, the effects cancel each other out, with no effects of wages on mobility rates on average. We find, however, that for star inventors, who have sufficiently strong alternative performance signals (e.g., strong patent records), the performance signal sent by wages is crowded out by the alternative signals. Accordingly, for star inventors we find that higher wages decrease mobility.

Keywords: inventors, mobility, signalling, wages

Suggested Citation

Ejermo, Olof BA and Schubert, Torben, Do Higher Wages Reduce Knowledge Worker's Job Mobility? Evidence for Swedish Inventors (January 2018). Journal of Management Studies, Vol. 55, Issue 1, pp. 108-145, 2018. Available at SSRN: https://ssrn.com/abstract=3085330 or http://dx.doi.org/10.1111/joms.12317

Lund University - Department of Economic History ( email )

United States
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HOME PAGE: http://staff.circle.lu.se/olof.ejermo/

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung ( email )

Breslauer Str. 48
Karlsruhe, 76139
United States

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