Cohort Wage Effects and Job Mobility

Economic conditions at the time of entering the labour market can induce wage differentials between entry cohorts. While there exists much empirical evidence on the existence and persistence of these cohort effects, little is known about their impact on employees’ mobility behaviour. Using a large data set derived from German administrative data, this paper analyzes the determinants of job mobility, emphasizing the effect of cohort wage differences in this context. The analysis suggests that cohort effects play an important role in explaining job transitions. Labour market entrants affected by unfavourable conditions and earning less than the average starting wage tend to be more mobile. Moreover, our empirical analysis shows that labour market transitions reduce the cohort effects in earnings, implying that job mobility operates as an adjustment mechanism that reverses the initial wage differences between entry cohorts. JEL codes: E24, J31, J62, J64