Events at CERGE-EI

Prof. Jean-Mark Robin

Sciences Po, France

Authors: Richard Blundell, Thomas Breda, Marc Chan, Jean-Marc Robin

Abstract: We use French matched employer-employee data to estimate a structural model of wage dynamics. Adding further frictions to the sequential auction model, we find that job-to-job mobility is predominantly inefficient. That is moves are not purely in response to a financial surplus. Allowing for between job-to-job moves that should have occurred (higher surplus with an external firm) but did not, and moves that did occur but should not have (lower surplus in destination firm), we estimate that the proportion of employees whose last state change is inefficient is about 35%. We also find that there is strong worker-firm sorting, but this does not show up in wages. We investigate in detail the role of the dynamics of match-specific wage shocks and examine the decomposition of the variance of wages and of the match surplus. We find that the match output, reflecting firm effects and worker-firm complementarities, is small while the match-specific effect dominates.

Full Text: Individual Wage Dynamics, Continuous Firm Types and Path Dependence