Job-to-Job Transitions, Sorting, and Wage Growth

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In this paper we measure the relative contribution of firm effects and match quality to wage growth experienced by workers moving between jobs. We provide evidence that firm effects only explain a small share of the observed wage dynamics. We also show that standard assumptions on match quality used to estimate fixed-effect wage models are not well supported in Danish data. We propose an alternative strategy to estimate an additive model of wage changes that includes a freely-varying match effect for all but a subset of job changers. Using estimates from Danish linked worker-firm data, we find that 44% of the wage growth experienced by job-to-job movers is attributable to an improvement in the quality of the worker-firm match, and 66% of the variance of wage growth is explained by the variance of the change in match effects.
Original languageEnglish
JournalLabour Economics
Pages (from-to)300-327
Number of pages28
Publication statusPublished - Dec 2018


  • Job mobility
  • Fixed-effect wage models
  • Panel data models
  • Assortative matching

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