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Faculty of Economics

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Liu, K.

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

Journal of Labor Economics, forthcoming

Abstract: This paper shows that job mobility is a valuable channel that employed workers use to mitigate bad labor market shocks. I estimate a model of wage dynamics jointly with a dynamic model of employment and 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. I find that, relative to the variance of individual-level shocks, the variance of match-level shocks is large and the consequent value of job mobility in reducing the welfare cost of these shocks is substantial, particularly for workers whose match-specific wages are low. In counterfactual analysis, I show how the value of job mobility may be affected by search costs and unemployment income.

JEL Codes: D91, J31, J62

Author links: Kai Liu  


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