Tenure, Experience, Human Capital and Wages: A Tractable Equilibrium Search Model of Wage Dynamics

Jesper Bagger (1) , François Fontaine (2) , Fabien Postel-Vinay (3, 4) , Jean-Marc Robin (4, 5)

1 RHUL - Royal Holloway [University of London]
2 BETA - Bureau d'Économie Théorique et Appliquée
3 University of Bristol [Bristol]
4 ECON - Département d'économie (Sciences Po)
5 UCL - University College of London [London]

We develop and estimate an equilibrium job search model of worker careers, allowing for human capital accumulation, employer heterogeneity and individual-level shocks. Monthly wage growth is decomposed into the contributions of human capital and job search, within and between jobs. Human capital accumulation is found to be the most important source of wage growth in early phases of workers’ careers, but is soon surpassed by search-induced wage growth. Conventional measures of the returns to tenure hide substantial heterogeneity between different workers in the same firm and between similar workers in different firms.

Keywords: Job search; Human capital accumulation; Within-job wage growth; Between-job wage growth; Individual shocks; Structural estimation; Matched employer-employee data

Domains: Economics and Finance

Jesper Bagger, François Fontaine, Fabien Postel-Vinay, Jean-Marc Robin. Tenure, Experience, Human Capital and Wages: A Tractable Equilibrium Search Model of Wage Dynamics. 2011. ⟨hal-03461428⟩