Changes in economic environment often influence industry competitiveness: For example, weaker exchange rates make exporting industries more competitive, higher energy prices benefit energy producers and harm large energy consumers.
Thus, industries are important for workers: Employment opportunities vary widely across industries, as do wages. This can best be understood in a model that recognizes the costs (but also the possibility) for workers to move across industries. We present an equilibrium job search model with industries and costly transition across industries. Individuals consider the long-run opportunities and risks of moving across industries. The model allows us to understand persistent differences in wages and unemployment across industries as well as considerable flows. We discuss identification of the model and propose future empirical applications using German data.