GEP Research Paper 01/38
Intra-Sectoral Labour Mobility and Adjustment Costs
R.J.R. Elliott and J. Lindley
Abstract
The ability of workers to change job, industry or occupation and the costs associated with a reallocation of labour in reaction to changes in economic circumstances is the subject of lively debate among academics and policy makers. This paper examines recent sectoral and industrial adjustment in the UK between 1995 and 2000 using data from the Quarterly Labour Force Survey. We explore the nature of adjustment within the manufacturing sector and examine the consequences of `within' and `between' industry adjustment on individual wages and the transition into and out of unemployment. Skill specificity, mobility costs and higher ex-ante returns are shown to significantly affect `within' and `between' industry adjustment in different ways. Industry skill specificity is thought to be an important determinant of earnings since there are wage losses to `between' industry movers and wage gains to `within' industry movers. In addition intra-industry trade contributes to 'within' industry mobility although there is little evidence that openness to trade makes any significant contribution to the displacement of workers.
Issued in February 2002.
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