Within- and Cross-Firm Mobility and Earnings Growth

Withinand Cross-Firm Mobility and Earnings Growth While it is well established that both promotions within firms and mobility across firms lead to significant earnings progression, little is known about the interaction between these types of mobility. Exploiting a large Danish panel data set and controlling for unobserved individual heterogeneity, we show that cross-firm moves at the non-executive level provide sizeable short-run gains (similar to the effect of a promotion), consistent with the existing literature. These gains, however, appear modest when compared with the persistent impact on earnings growth of promotions (either within or across firms) and subsequent mobility at a higher hierarchy level. NON-TECHNICAL SUMMARY What is better for your salary – getting promoted or switching employers? A dataset from Denmark that follows the entire population over more than a decade allows us to address this question. We use a statistical procedure that accounts for the fact that people may differ at the individual level in their earnings capacities. Our findings suggest that moving to a new employer gives a similar boost to short-run earnings growth than a promotion to an executive-level job with the current employer. Jobs further up in the hierarchy, however, provide a steeper growth path for earnings. For longer-term earnings growth it therefore seems more important to move up in the hierarchy than to land jobs with other employers. JEL Classification: C33, J6, M51