A Dynamic Analysis of Sectoral Mobility, Worker Mismatch, and the Wage-Tenure Profile

A dynamic multi-sector model with both net and excess mobility is developed to quantify the determinants of the canonical increasing wage-tenure profile. The model distinguishes between three potential factors: sector-specific skill accumulation, sector-specific shocks, and dynamic worker-sector mismatch shocks. The sector-specific skill premium drives the observed negative correlation between life-time earnings and mobility. Excess mobility driven by worker-sector mismatch shocks explains nearly 20 percent of the observed wage growth for recent movers. Ignoring dynamic worker-sector mismatch leads to biased estimates of the sector-specific skill premium. Sectoral shocks have a negligible impact on wages and mobility.