Worker Mobility and Labour Market Opportunities

joint with Monica Costa Dias (University of Bristol and IFS), Robert Joyce (IFS), Peter Spittal (University of Bristol and IFS), and Xiaowei Xu (IFS)

In preparation

Abstract: We develop a new empirical measure of worker-specific labour market tightness, grounded in a theoretical search and matching model where the matching technology accounts for differences in the intensity of competition workers face from different types of other job seekers. Our measure also captures the varying ability of workers to move into different lines of work, using historical patterns of job mobility to infer how suitable a worker with given experience is for different types of jobs. We demonstrate that our measure outperforms more traditional measures of market tightness in predicting key workers’ outcomes such as job changes, wages and occupational progression.

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The Job Ladder: Inflation vs. Reallocation

joint with Giuseppe Moscarini (Yale University)

Current version: July 2023

Abstract: We introduce on-the-job search frictions in an otherwise standard monetary DSGE New-Keynesian model. Heterogeneity in productivity across jobs gives rise to a job ladder. Firms Bertrand-compete for employed workers according to the Sequential Auctions protocol of Postel-Vinay and Robin (2002). Outside job offers to employed workers, when accepted, reallocate employment up the productivity ladder; when declined, because matched by the current employer, they raise production costs and, due to nominal price rigidities, compress mark-ups, building inflationary pressure. When employment is concentrated at the bottom of the job ladder, typically after recessions, the reallocation effect prevails, aggregate supply expands, moderating marginal costs and inflation. As workers climb the job ladder, reducing slack in the employment pool, the inflation effect takes over. The model generates endogenous cyclical movements in the Neo Classical labor wedge and in the New Keynesian wage mark-up. The economy takes time to absorb cyclical misallocation and features propagation in the response of job creation, unemployment and inflation to aggregate shocks.  The ratio between job-finding probabilities job-to-job and from unemployment, a measure of the "Acceptance rate" of job offers to employed workers, predicts negatively inflation, independently of the unemployment rate.

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The Worker-Job Surplus

joint with Ilse Lindenlaub (Yale University)

Current version: January 2021

Abstract: The worker-job surplus - the sum of the worker's and the employer's net values of an employment relationship - is the object that drives decisions in most matching models of the labor market. In this paper, we develop a theory-based empirical method to determine which, from a set of observable worker and job characteristics, impact the worker-job surplus in the data. We exploit the mobility choices of employed workers. Our method further indicates whether workers sort along those surplus-relevant attributes when searching for jobs. It also provides a test of the commonly used single-index assumption, according to which worker and job heterogeneity can each be summarized by scalar indices. We implement our method on US data using the Survey of Income and Program Participation and the O*NET. The results suggest that a relatively sparse model underlies the data. On the job side, a cognitive and an interpersonal skill requirement impact the surplus along with the (dis)amenity of work duration as well as the workplace size. On the worker side, we find that most of the relevant characteristics are symmetric to the selected job requirements. We reject the existence of a single-index representation of these relevant multi-dimensional worker and job attributes. We use our results in a new approach to defining the economy's labor submarkets, highlighting a potentially important application of our methodology.

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A Structural Analysis of Mental Health and Labor Market Trajectories

joint with Grégory Jolivet (University of Bristol)

Current version: December 2023 - Forthcoming Review of Economic Studies

Abstract: We analyze the joint life-cycle dynamics of labor market and mental health outcomes. We allow for two-way interactions between work and mental health. We model selection into jobs on a labor market with search frictions, accounting for the level of exposure to stress in each job using data on occupational health contents. We estimate our model on British data from Understanding Society combined with information from O*NET. We estimate the impact of job characteristics on health dynamics and of the effects of health and job stress contents on career choices. We use our model to quantify the effects of job loss or health shocks that propagate over the life cycle through both health and work channels. We also estimate the (large) values workers attach to health, employment or non-stressful jobs. Lastly, we investigate the consequences on health, employment and inequality of trend changes in the distribution of job health contents.

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Occupational Mobility and Wage Dynamics Within and Between Firms

joint with Francis Kramarz (CREST-INSEE) and Jean-Marc Robin (Sciences Po)

In preparation

Abstract: Recent research has emphasized the key importance of the equilibrium allocation of heterogeneous workers into heterogeneous jobs or occupations as a determinant of economic efficiency. Most of the literature on this subject envisions worker (re-)allocation as occurring between employers. Yet, the data suggest that a very large amount of reallocation occurs within firms, in the form of internal promotions or de-motions. We construct a structural job search model with internal and external labor markets. Internal labor markets mediate occupational mobility and wage dynamics within firms whereas the external labor market organizes any mobility involving an employer change, and related wage dynamics. The aim of this construction is to understand and quantify the role of within-firm reallocation in the assignment process of workers into jobs. The model is estimated on a large-scale matched employer-employee data set covering the entire French business sector.

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The Relative Power of Employment-to-Employment Reallocation and Unemployment Exits 

in Predicting Wage Growth

joint with Giuseppe Moscarini (Yale University)

Current version: December 2016 - Shorter version published in American Economic Review Papers and Proceedings

Abstract: We investigate the hypothesis that labor demand is transmitted to wage growth primarily through Employer-to-Employer (EE) transitions. Workers often quit their jobs when they receive better offers, hence the faster these EE transitions, the higher the pace of reallocation towards high wage jobs, and the higher average wage growth. Also, the more opportunities workers have to quit, the more aggressive are their employers' wage responses, to try and retain them. Observed wage raises can thus either reflect reallocation by job movers or rent extraction by job stayers following outside offers. We think of the latter type of wage raises as "inflationary", because they appear like cost shocks. We introduce a statistical framework to measure the covariance structure of nominal, rather than real, wage growth and labor market transitions. We ask whether a counterfactual transition rate (EE, UE etc.) that applies to each worker covaries with his wage growth, even when no individual transition occurs. This counterfactual is built by projecting actual transitions on a rich set of observable worker and job characteristics and on calendar time. In order to entertain the hypothesis of a Phillips curve, we also include in this covariance structure the unemployment rate.

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