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Home Publications The Relative Power of Employment-to-Employment Reallocation and Unemployment Exits in Predicting Wage Growth

The Relative Power of Employment-to-Employment Reallocation and Unemployment Exits in Predicting Wage Growth

Fabien Postel-Vinay and Giuseppe Moscarini
Journal article | American Economic Review

We study the cyclical comovement nominal wage growth (either monthly earnings or hourly wage rate) and labor market flows. We use microdata from the Survey of Income and Program Participation over 1996-2013 to purge composition effects in worker and job characteristics and to isolate the reallocative effect of Employer-to-Employer (EE) transitions. We find an "EE wage Phillips curve": wage inflation comoves positively with EE as strongly as with the employment rate. This correlation holds for job stayers; we interpret the EE rate as a measure of labor demand. We find no analogous evidence for the job-finding rate from unemployment.