Earnings Instability of Job Stayers and Job Changers

There is still no consensus on the causes of the increase of earnings insta-bility in the US in the 70s and 80s. It is di ¢ cult to attribute the increase to job mobility because there is no evidence of a contemporaneous decline in job stability and job security. However there is evidence of an increase in workers mobility across occupation and industry with larger wage changes upon job change. This paper shows that voluntary job-to-job mobility ac-counts for a substantial part of the increase in earnings instability after controlling for industry and occupation switches. The empirical evidence is consistent with the predictions of a search and matching model where an increase in the variance of productivity shocks increases on-the-job search and earnings instability among voluntary job-to-job changers while leaving job turnover constant