Room -1.26 EEG & Online
This paper assesses the impact of occupational mobility on life cycle wage inequality. I develop a model of job mobility which attributes differential returns to occupations to occupationally heterogeneous labor market frictions, compensating differentials, and non-pecuniary job switching costs. I estimate the structural model on linked Hungarian administrative data and use it to quantify the relative importance of each of these mechanisms. High-skill occupations offer higher wages and more stable employment; in turn, low-skill occupations feature higher non-wage amenities but larger non-pecuniary costs of switching to high-skill jobs. As a result, workers who start their careers in the bottom 10 percent of the wage distribution in a high-skill occupation surpass those who start in the top 5 percent of a low-skill occupation in 5 years. I find that occupationally heterogeneous labor market frictions are the key drivers of these ex ante wage profiles. These results indicate that occupational heterogeneity in the sources of wage inequality is instrumental to fully account for life cycle wage dynamics.
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