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Measuring and Explaining Management Practices Across Firms

The experiences of young college graduates in the labor market have been under a lot of scrutiny in the last few years. It has been well documented that new graduates have had a hard time finding high quality jobs in the labor market. Some have used such facts to argue for and against the necessity of having a college degree. The academic literature has mostly remained on the sidelines of such a discussion. However, one strand of the literature that has been influential in this debate has tried to quantify the ’scarring effects’ of graduating in a recession. According to some estimates it takes around 10 years for workers to recover from the harmful effects of starting a career in a recession. Various explanations have been offered to explain this fact and almost all of them contain a story about frictions in the labor market. Relatively little attention has been paid to the career transitions of middle aged workers. Since the seminal work of Jovanovic (1979a) economists have known that workers move to better job matches over time. The more time they spend in the labor market, the more precisely they know about their match quality. This simple model can explain some well known empirical facts such as rising wages with experience (and tenure in a job) and declining job mobility with age. Adding search frictions to such an environment can hamper the learning process and workers then take a longer time to move to better job matches (see Papageorgiou (2013) for such a combination). One can also human capital accumulation and job switching costs to add more persistence to this phenomenon (see Wee (2013) for example). Nevertheless the underlying pattern generated by all such models is that workers should move to better job opportunities with experience