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Occupational Mobility and Wage Inequality

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Author Info
GUEORGUI KAMBOUROV
IOURII MANOVSKII

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Abstract

In this article we argue that wage inequality and occupational mobility are intimately related. We are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the U.S. was as high as 16% a year in the early 1970's and had increased to 21% by the mid-1990's. We develop a general equilibrium model with occupation-specific human capital and heterogeneous experience levels within occupations. We find that the model, calibrated to match the level of occupational mobility in the 1970's, accounts quite well for the level of (within-group) wage inequality in that period. Next, we find that the model, calibrated to match the increase in occupational mobility, accounts for over 90% of the increase in wage inequality between the 1970's and the 1990's. The theory is also quantitatively consistent with the level and increase in the short-term variability of earnings. Copyright © 2009 The Review of Economic Studies Limited.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-937X.2009.00535.x
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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 76 (2009)
Issue (Month): 2 (04)
Pages: 731-759
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Handle: RePEc:bla:restud:v:76:y:2009:i:2:p:731-759

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. Topel, Robert H, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring. [Downloadable!] (restricted)
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  6. repec:fth:prinin:400 is not listed on IDEAS
  7. James Heckman & Lance Lochner & Ricardo Cossa, 2002. "Learning-By-Doing Vs. On-the-Job Training: Using Variation Induced by the EITC to Distinguish Between Models of Skill Formation," NBER Working Papers 9083, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Paul Beaudry & David A. Green, 2000. "Cohort patterns in Canadian earnings: assessing the role of skill premia in inequality trends," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 907-936, November. [Downloadable!] (restricted)
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  10. Marcelo Veracierto, 2002. "On the cyclical behavior of employment, unemployment and labor force participation," Working Paper Series WP-02-12, Federal Reserve Bank of Chicago. [Downloadable!]
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  11. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March. [Downloadable!] (restricted)
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  13. Henry S. Farber, 1998. "Mobility and Stability: The Dynamics of Job Change in Labor Markets," Working Papers 779, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  15. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February. [Downloadable!] (restricted)
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  19. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March. [Downloadable!] (restricted)
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  21. Heathcote, Jonathan & Storesletten, Kjetil & Violante, Giovanni L, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  23. Loungani, P. & Ruch, M. & Tave, W., 1989. "Stock Market Dispersion, Unemployment And Gnp," Papers 89-02, Florida - College of Business Administration.
  24. Daniel S. Hamermesh, 1999. "Changing Inequality In Markets For Workplace Amenities," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1085-1123, November. [Downloadable!] (restricted)
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  25. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October. [Downloadable!]
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  26. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
  27. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June. [Downloadable!] (restricted)
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  28. Gottschalk, Peter, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring. [Downloadable!] (restricted)
  29. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rosario Crinò, 2009. "Service Offshoring and White-Collar Employment," UFAE and IAE Working Papers 775.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  2. Diego Comin & Erica L. Groshen & Bess Rubin, 2006. "Turbulent firms, turbulent wages?," Staff Reports 238, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  3. Pedro S. Amaral, 2003. "Turbulence, Heterogeneity, and Wage Earnings Inequality," Macroeconomics 0309016, EconWPA. [Downloadable!]
  4. Igor Livshits & James MacGee & Michele Tertilt, 2006. "Accounting for the Rise in Consumer Bankruptcies," University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers 20066, University of Western Ontario, RBC Financial Group Economic Policy Research Institute. [Downloadable!]
    Other versions:
  5. Olga Lazareva, 2009. "Health Effects of Occupational Change," Working Papers w0129, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  6. Pouliakas, Konstantinos & Panos, Georgios & Zangelidis, Alexandros, 2009. "The Inter-Related Dynamics of Dual Job Holding, Human Capital and Occupational Choice," MPRA Paper 16859, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  7. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Rising Occupational and Industry Mobility in the United States: 1968-1993," IZA Discussion Papers 1110, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2006. "Frictional Wage Dispersion in Search Models: A Quantitative Approach," CEPR Discussion Papers 5935, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper 06-07, Federal Reserve Bank of Richmond. [Downloadable!]
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  10. Christina Gathmann & Uta Schönberg, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Doriana Ruffino, 2007. "Resuscitating The Businessman Risk: A Rationale For Familiarity-Based Portfolios," Boston University - Department of Economics - Working Papers Series WP2007-037, Boston University - Department of Economics. [Downloadable!]
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