The Role of Comparative Advantage and Learning in Wage Dynamics and Intrafirm Mobility: Evidence from Germany

Abstract

This article measures the importance of job level assignment based on comparative advantage and learning about workers’ ability in explaining intrafirm wage and mobility dynamics using survey data from the German Socio‐Economic Panel. The results reveal the importance of nonrandom selection of workers into the rungs of the firm’s job ladder. Measured and unmeasured ability play important roles in workers' rank assignment, with unmeasured ability being more important at higher levels of the hierarchical job structure. There is some evidence of learning effects for workers below age 35 generating mobility between upper and executive levels.