Informational Frictions and the Life-Cycle Dynamics of Job Mobility

This paper studies the life-cycle dynamics of individual job mobility. After entry into the labor market, young individuals typically change jobs very frequently and retain new jobs just for a short period of time. In later stages of their career, workers tend to hold stable jobs and they are substantially more likely to keep a new job than in the early years. This paper argues that the labor market experience individuals accumulate early in their career affects their job mobility in later stages. We construct a life-cycle model of the labor market whose main characteristic is an information imperfection in the matching process. The key ingredient is that the imperfection is assumed to be worker-specific and in particular it is linked to an individual's previous labor market history. We estimate the model by indirect inference on data from the $NLSY$ 79 and find that it can capture very well the observed life-cycle profile of individual labor market mobility.