Worker Flows and Wage Growth Over the Life Cycle: A Cross Country Analysis
Using panel data for 1990 2014 from 12 OECD countries, I document three facts about cross country labor market outcomes. First, worker flows and life cycle wage growth differ substantially across countries. Second, the fluidity of a country's labor market covaries positively with life cycle wage growth of its workers. Third, the direct effect of job shopping accounts for only a quarter of this. I build an equilibrium life cycle model of the labor market that features search and human capital accumulation, and show that a faster rate of climbing the job ladder increases incentives to accumulate human capital. A calibrated version of the model suggests that differences in the cost to firms of hiring may account for all of the empirical covariation between fluidity, on the one hand, and wage growth and output per capita, on the other, and 43 45 percent of the overall variation in these measures.