Working Paper: NBER ID: w29698
Authors: Niklas Engbom
Abstract: Using panel data from 23 OECD countries, I document that wages grow more over the life-cycle in countries where job-to-job mobility is more common. A life-cycle theory of job shopping and accumulation of skills on the job highlights that a more fluid labor market allows workers to faster relocate to jobs where they can better use their skills, incentivizing accumulation of skills. Lower labor market fluidity reduces life-cycle wage growth by 20 percent and aggregate labor productivity by nine percent across the OECD relative to the US. I derive a set of testable predictions for training and confront them with comparable cross-country training data, finding support for the theory.
Keywords: Labor Market Fluidity; Human Capital Accumulation; Wage Growth; Job Mobility
JEL Codes: E24; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lower labor market fluidity (J69) | Reduces lifecycle wage growth (J39) |
| Lower labor market fluidity (J69) | Reduces aggregate labor productivity (E24) |
| Higher job-to-job mobility (J62) | Increases lifecycle wage growth (J39) |
| Differences in labor market fluidity (J69) | Accounts for steeper lifecycle wage growth (J39) |
| Human capital accumulation (J24) | Increases lifecycle wage growth (J39) |
| Policies and regulations that reduce labor market fluidity (J48) | Negatively affects workers' lifecycle wage growth (J39) |
| Policies and regulations that reduce labor market fluidity (J48) | Negatively affects aggregate economic outcomes (F62) |