Occupational and regional mobility as substitutes

Abstract

"Job mobility offers opportunities for workers to obtain wage increases, but returns to job changes differ considerably. We argue that parts of this inequality result from a trade-off between occupational and regional mobility. Both mobility types offer alternative strategies to improve one's labor market position; however, they each contain unique restrictions. High costs for regional mobility can thus evoke occupation changes, even though the resulting human capital devaluation leads to lower wage increases. We use linked retrospective life-course data for Germany (ALWA-ADIAB) and apply competing risks models to show that restrictions on one type of mobility drive individuals toward the other. Using fixed-effects regressions, we show that occupational mobility leads to lower wage increases compared to regional mobility. We conclude that the trade-off between occupational and regional mobility explains part of the differential returns to job mobility and contributes to wage inequality. We expect these mechanisms to become more pronounced in the future as technological and institutional changes alter job requirements and thereby mobility incentives." (Author's abstract, IAB-Doku) ((en))

Cite article

Reichelt, M. & Abraham, M. (2015): Occupational and regional mobility as substitutes. A new approach to understanding job changes and wage inequality. (IAB-Discussion Paper 14/2015), Nürnberg, 27 p.