No. 563 - Job-to-job flows and wage dynamics in France and Italy

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by Clémence Berson, Marta De Philippis and Eliana VivianoJune 2020

Job-to-job flows positively affect aggregate wage dynamics both directly, due to the wage premium usually associated with the transition to a new job, and indirectly, since employers respond to other firms' poaching by increasing the wages of their workers. In the U.S., wage dynamics seem more influenced by job-to-job flows than by flows into or out of employment. In this paper, we evaluate whether this result holds also for France and Italy, characterized by a different labour market structure.

Using comparable administrative data referring to the last 20 years we find that, job-to-job transitions contribute positively to wage growth both in France and Italy. Job-to-job flows and the associated wage gains tend to be larger in high-skilled occupations and for permanent workers. As in the U.S., individuals are more likely to move to younger firms, which intensively poach workers from other firms. However, since total job-to-job flows are smaller and display much lower cyclicality than in the U.S., their contribution to aggregate wage dynamics is low, while the contribution of flows into and out of employment remains sizeable.

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