David Wiczer, Stony Brook

"Cyclical Earnings and Employment Transitions"


Recessions increase unemployment risk and decrease flows across employers and occupations. This paper explores the cyclical differences in the earnings change distribution---focusing on the more volatile tails. Because earnings changes are larger when workers change jobs and even larger when switching occupations, cyclicality in the incidence of flows directly affects the tails of the distribution of earnings changes. However, the business cycle also affects earnings outcomes conditional on a job, employment status and/or occupation change. Because job and occupation switching is endogenous, we introduce a business cycle model with on-the-job search and occupational mobility, which allows us to structurally decompose the contribution of flows and returns. Cyclical fluctuations in exogenous flows, along with worsening returns, drive dynamics in the bottom tail of earnings growth while returns affect changes in the top tail.

Joint with Carlos Carrillo Tudela and Ludo Visschers

Contact person: Daphné Jocelyne Skandalis