Creator: Pastorino, Elena Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 482 Abstract:
In order to analyze careers both within and across firms, this paper proposes a matching model of the labor market that extends existing models of job assignment and learning about workers’ abilities. The model accounts for worker mobility across jobs and firms, for varying degrees of generality of ability, and for the possibility that firms affect the information they acquire about workers through job assignment. I characterize equilibrium assignment and wages, and show how, depending on how abilities and jobs are distributed across firms, equilibrium gives rise to widely varying patterns of job mobility within firms and turnover across firms, even if matching would be perfectly assortative in the absence of uncertainty. The implied job and wage dynamics display features that are consistent with a broad set of empirical findings on careers in firms and the labor market. In particular, workers can experience gradual promotions and wage increases following successful performance but few or no demotions when employed by the same firm. The model also produces turnover across firms and occupations after both successful and unsuccessful experiences, leading to wage increases or decreases following a firm or occupation change. Overall, the results in this paper provide a unified framework in which to interpret the dynamics of jobs and wages in firms and the labor market.
Keyword: Turnover, Learning, Careers in firms, and Matching Subject (JEL): J31 - Wage Level and Structure; Wage Differentials, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, and J62 - Job, Occupational, and Intergenerational Mobility; Promotion