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Estimating The Employer Switching Costs And Wage Responses Of Forward-Looking Engineers

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Executive Summary

The authors estimate the relative magnitudes of worker switching costs and how much the employer switching of experienced engineers responds to outside wage offers. Institutional features imply that voluntary turnover dominates switching in the market for Swedish engineers from 1970 - 1990. They use data on the allocation of engineers across a large fraction of Swedish private sector firms to estimate the relative importance of employer wage policies and switching costs in a dynamic programming, discrete choice model of voluntary employer choice. The differentiated firms are modeled in employer characteristic space and each firm has its own age-wage profile.

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