We analyse the joint life-cycle dynamics of labour market and mental health outcomes while allowing for two-way interactions between work and mental health. We model selection into jobs on a labour market with search frictions, accounting for the level of exposure to stress in each job using data on occupational health contents. Taking our model to British data from Understanding Society combined with information from O*NET, we estimate the impact of job characteristics on health dynamics and the effects of health and job stress contents on career choices. We use our model to quantify the effects of job loss, health shocks, or job stress shocks that propagate over the life cycle through both health and work channels. We also estimate the (large) values workers attach to health, employment, or nonstressful jobs.

We analyze sorting in a frictional labor market when workers and jobs have multidimensional characteristics. We say that matching is positive assortative in dimension (j, k) if workers with higher endowment in skill k are matched to a job distribution with higher values of attribute j in the first-order stochastic dominance sense. Crucial for sorting is a single-crossing property of technology. Sorting is positive between worker-job attributes with strong complementarities but negative in other dimensions. Finally, sorting is based on comparative advantage: workers sort into jobs that suit their skill mix rather than their overall skill level.

We construct and estimate an equilibrium search model with on?the?job?search. Firms make take?it?or?leave?it wage offers to workers conditional on their characteristics and they can respond to the outside job offers received by their employees. Unobserved worker productive heterogeneity is introduced in the form of cross?worker differences in a ?competence? parameter. On the other side of the market, firms also are heterogeneous with respect to their marginal productivity of labor. The model delivers a theory of steady?state wage dispersion driven by heterogenous worker abilities and firm productivities, as well as by matching frictions. The structural model is estimated using matched employer and employee French panel data. The exogenous distributions of worker and firm heterogeneity components are nonparametrically estimated. We use this structural estimation to provide a decomposition of cross?employee wage variance. We find that the share of the cross?sectional wage variance that is explained by person effects varies across skill groups. Specifically, this share lies close to 40% for high?skilled white collars, and quickly decreases to 0% as the observed skill level decreases. The contribution of market imperfections to wage dispersion is typically around 50%.

We study employment reallocation across employers through the lens ofa dynamic job ladder model. Workers always agree on a ranking ofemployers at all points in time and search for better jobs both offand on the job. A parsimonious version of the model fits well the timeseries of gross worker flows by employer size from newly available USdata from the Job Openings and Labor Turnover Survey. Focusing on the US experience in and around the Great Recession, our evidence indicates that the job ladder stopped working then and has not fully resumed yet.

We construct a structural model of on-the-job search in which workers differ in skills along several dimensions and sort themselves into jobs with heterogeneous skill requirements along those same dimensions. Skills are accumulated when used, and depreciate when not used. We estimate the model combining data from O*NET with the NLSY79. We use the model to shed light on the origins and costs of mismatch along heterogeneous skill dimensions. We highlight the deficiencies of relying on a unidimensional model of skill when decomposing the sources of variation in the value of lifetime output between initial conditions and career shocks.

We study the cyclical comovement nominal wage growth (either monthly earnings or hourly wage rate) and labor market flows. We use microdata from the Survey of Income and Program Participation over 1996-2013 to purge composition effects in worker and job characteristics and to isolate the reallocative effect of Employer-to-Employer (EE) transitions. We find an “EE wage Phillips curve”: wage inflation comoves positively with EE as strongly as with the employment rate. This correlation holds for job stayers; we interpret the EE rate as a measure of labor demand. We find no analogous evidence for the job-finding rate from unemployment.

The canonical model of job search and wage posting (Burdett and Mortensen, 1998) establishes a natural connection between the average wage growth in the economy and the pace of Employer-to-Employer (EE) transitions, predicting wage growth to be positively related to the pace of EE reallocation for all workers, but especially for stayers. We verify this empirically both with aggregate time series and with longitudinal micro data from the Survey of Income and Program Participation (SIPP). We argue that monetary authorities concerned with inflationary wage pressure should pay more attention directly to EE reallocation and less to the unemployment rate.

We document a negative correlation, at business cycle frequencies, between the net job creation rate of large employers and the level of aggregate unemployment that is much stronger than for small employers. The differential growth rate of employment between initially large and small employers has an unconditional correlation of —0.5 with the unemployment rate, and varies by about 5 percent over the business cycle. We exploit several datasets from the United States, Denmark, and France, both repeated cross sections and job flows with employer longitudinal information, spanning the last four decades and several business cycles. We discuss implications for theories of factor demand.

In other work (Moscarini and Postel-Vinay, 2008, 2009a), we find a distinct cyclical pattern of the relative performance of large and small businesses in terms of net job creation. Large employers destroy proportionally more jobs during and right after recessions, and create proportionally more jobs late in expansions, relative to small employers. Differential size growth between small and large firms is strongly positively correlated with the unemployment rate. This pattern is observer both in a 1978-2005 census of U.S. employers, the Business Dynamics Statistics, and among listed companies, in Compustat. In this paper, we show that this cyclical pattern of relative performance is also reflected in stock returns. Specifically, we show that the difference in returns between benchmark portfolios of small cap stocks and portfolios of large cap stocks is also positively correlated with the unemployment rate. Financial consultants and fund managers commonly recommend investing in small cap stocks during business cycle recoveries. Our findings, while consistent with that advice, pertain to all phases of the business cycle. We propose an explanation of both facts based on dynamic competition between employers of different sizes and different productivities. The model is a stochastic dynamic version of the job search and wage posting model of Kenneth Burdett and Dale T. Mortensen (1998), which we analyze in detail in Moscarini and Postel-Vinay (2009b). It is a job ladder model, where smaller firms are smaller because they are less productive, offer lower wages, therefore are less attractive to workers and less successful in poaching workers out of competing firms. This lack of competitiveness on the labor market is more of a drawback