Local Differences in Experience–Wage Profiles
| First-Step Specification | Model I FE with Worker Controls | Model II FE with Worker and Employer Controls | ||
|---|---|---|---|---|
| Component of Wage Profile Second-Step Results (103 Local Labor Markets) | Linear | Quadratic (×100) | Linear | Quadratic (×100) |
| Panel A: Not Conditioning on Local Search Frictions | ||||
| Log population density | 0.0012 | -0.0023 | 0.0011 | -0.0020 |
| (0.0004) | (0.0015) | (0.0004) | (0.0014) | |
| Panel B: Conditioning on the Labor Supply Elasticity | ||||
| Log population density | 0.0017 | -0.0042 | 0.0017 | -0.0036 |
| (0.0006) | (0.0018) | (0.0006) | (0.0018) | |
| Labor supply elasticity | -0.0020 | 0.0070 | -0.0019 | 0.0058 |
| (0.0008) | (0.0026) | (0.0008) | (0.0025) | |
| Panel C: Conditioning on the Labor Supply Elasticity Instrumented with the Share of Hires from Nonemployment | ||||
| Log population density | 0.0009 | -0.0029 | 0.0008 | -0.0025 |
| (0.0007) | (0.0020) | (0.0007) | (0.0021) | |
| Labor supply elasticity | 0.0012 | 0.0022 | 0.0012 | 0.0019 |
| (0.0014) | (0.0040) | (0.0014) | (0.0040) | |
| Panel D: Conditioning on the Share of Hires from Nonemployment (Reduced Form) | ||||
| Log population density | 0.0007 | -0.0031 | 0.0007 | -0.0027 |
| (0.0007) | (0.0025) | (0.0007) | (0.0025) | |
| Share of hires from nonemployment | -0.0117 | -0.0219 | -0.0117 | -0.0188 |
| (0.0132) | (0.0422) | (0.0125) | (0.0422) | |
Notes: IEB and BHP, 1985–2010. Coefficients from second-step regressions as in Equations 7 and 8. The dependent variables are the region-specific coefficients of real experience and its square (times 100), respectively, obtained from a first-step wage regression akin to Equation 6 including worker–region fixed effects. The labor supply elasticity is estimated using Model II from Table 2. The F-statistic of the first-stage regression for Panel C is 23.38. Further region controls are the shares of low-skilled and high-skilled workers, the log employment share of the largest two-digit industry, the log Herfindahl index of employment at industry level, and the unemployment rate, where all second-step regressors are centered around their means. In the first-step wage equation, worker controls consist of real experience (linearly and squared), as well as groups of dummies for education, tenure, one-digit occupation, and non-German nationality. Employer controls are the shares of part-time, high-skilled, low-skilled, female, and non-German workers among the plant’s workforce, as well as groups of dummies for plant size and two-digit industry. We also add year dummies. Robust standard errors are given in parentheses.