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

A dynamic multi-sector model with net and excess mobility is developed to quantify the salient features of the wage-mobility relationship. The model dis- tinguishes between three factors: sector-specific skill accumulation, sectoral- level shocks, and dynamic worker-sector mismatch shocks. Sector-specific skill accumulation and dynamic mismatch shocks play an important role, while sectoral-level shocks have a negligible impact. The sector-specific skill pre- mium drives the observed negative correlation between lifetime earnings and mobility. Excess mobility driven by the worker-sector mismatch shocks ex- plains nearly 20 percent of the observed wage growth for recent movers. A model featuring only dynamic worker-sector mismatch shocks still captures the salient features of the wage-tenure profile and sectoral mobility.