Industry Wage Differences and Intra-Industry Mobility of Workers

Abstract

This paper develops a simple model of intra-industry mobility of workers as a function of skills and industry rents to identify the causes of Industry wage differences, rents or skills. Workers in an industry paying high rents are more likely to be mobile within their industries relative to across industries as the rents outside the Industry are lower. In contrast, workers with greater amounts of general skills do not necessarily have a stronger tendency to remain within the same industry as their skills are equally valued in all industries. although industry specific skills, have the same effect as the rents in limiting inter industry mobility. The overall combined effect of these skills on intra-industry mobility is smaller as various skills are linked with each other commonly through basic ability of workers. This identification scheme is applied to the Panel Study of Income Dynamics (PSID) and the evidence is generally consistent with the skill Interpretation of industry rents.