DP16961 Labor Market Fluidity and Human Capital Accumulation

Author(s): Niklas Engbom
Publication Date: January 2022
Programme Areas: Labour Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16961

Using panel data from 23 OECD countries, I document that wages grow more over the life-cycle in countries where job-to-job mobility is more common. A life-cycle theory of job shopping and accumulation of skills on the job highlights that a more fluid labor market allows workers to faster relocate to jobs where they can better use their skills, incentivizing accumulation of skills. Lower labor market fluidity reduces life-cycle wage growth by 20 percent and aggregate labor productivity by nine percent across the OECD relative to the US. I derive a set of testable predictions for training and confront them with comparable cross-country training data, finding support for the theory.