ON‐THE‐JOB SEARCH,PRODUCTIVITY SHOCKS,AND THE INDIVIDUAL EARNINGS PROCESS* |
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| Authors: | Fabien Postel‐Vinay Hélène Turon |
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| Institution: | 1. University of Bristol, U.K., Paris School of Economics, CEPR, and IZA;2. University of Bristol, U.K., and IZA;3. The authors thank Gadi Barlevy, Jeff Campbell, Morris Davis, Jean‐Marc Robin, Rob Shimer, and Randy Wright for their inspiring thoughts on this article and two anonymous referees for very constructive suggestions. Very useful feedback was also received from conference participants at the 2005 Essex Thanksgiving conference and the 2006 SED meeting (Vancouver), and seminar audiences at Bristol, Paris I, CREST, UCL, Queen Mary, Kent, Carnegie Mellon, Minnesota, the Chicago Fed, Toulouse, and Oxford. Postel‐Vinay gratefully acknowledges financial support from the ESRC (grant reference RES‐063‐27‐0090). The usual disclaimer applies. Please address correspondence to: Fabien Postel‐Vinay, Department of Economics, University of Bristol, 8 Woodland Road, Bristol BS8?1TN, U.K. Phone: +44(0)117‐928‐8431. Fax: +44(0)791‐350‐8660. E‐mail: . |
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| Abstract: | Individual labor earnings observed in worker panel data have complex, highly persistent dynamics. We investigate the capacity of a structural job search model with on‐the‐job search, wage renegotiation by mutual consent, and i.i.d. productivity shocks to replicate salient properties of these dynamics, such as the covariance structure of earnings, the evolution of individual earnings mean, and variance with the duration of uninterrupted employment, or the distribution of year‐to‐year earnings changes. Structural estimation of our model on a 12‐year panel of highly educated British workers shows that our simple framework produces a dynamic earnings structure that is remarkably consistent with the data. |
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