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Comparative Advantage, Learning, and Sectoral Wage Determination

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Author Info
Robert Gibbons (Massachusetts Institute of Technology and National Bureau of Economic Research)
Lawrence F. Katz (Harvard University and National Bureau of Economic Research)
Thomas Lemieux (University of British Columbia and National Bureau of Economic Research)
Daniel Parent (McGill University)

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Abstract

We develop a model in which a worker's skills determine the worker's current wage and sector. The market and the worker are initially uncertain about some of the worker's skills. Endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills. We show how the model can be estimated using nonlinear instrumental variables techniques. We apply our methodology to study wages and allocation of workers across occupations and industries using individual-level panel data from the National Longitudinal Survey of Youth. We find that high-wage sectors employ high-skill workers and offer high returns to workers' skills.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 23 (2005)
Issue (Month): 4 (October)
Pages: 681-724
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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:4:p:681-724

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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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    Other versions:
  2. Stephanie Lluis, . "The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany," Working Papers 0103, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  3. Lawrence F. Katz & Alan B. Krueger, 1991. "Changes in the Structure of Wages in the Public and Private Sectors," NBER Working Papers 3667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November. [Downloadable!] (restricted)
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
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  7. Stephen Ross & Paul Taubman & Michael L. Wachter, 1981. "Learning by Observing and the Distribution of Wages," NBER Chapters, in: Studies in Labor Markets, pages 359-386 National Bureau of Economic Research, Inc. [Downloadable!]
  8. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
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  17. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-55, December. [Downloadable!] (restricted)
  18. Lemieux, Thomas, 1998. "Estimating the Effects of Unions on Wage Inequality in a Panel Data Model with Comparative Advantage and Nonrandom Selection," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 261-91, April. [Downloadable!] (restricted)
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
    Other versions:
  20. Robert Gibbons & Michael Waldman, 1998. "A Theory of Wage and Promotion Dynamics in Internal Labor Markets," NBER Working Papers 6454, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Gibbons, R. & Katz, L., 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differences," Working papers 543, Massachusetts Institute of Technology (MIT), Department of Economics.
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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. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2006. "The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates," NBER Working Papers 12159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Daniel Parent, 2002. "Incentives? The Effect of Profit Sharing Plans Offered by Previous Employers on Current Wages," CIRANO Working Papers 2002s-54, CIRANO. [Downloadable!]
    Other versions:
  3. Thomas Lemieux & W. Bentley Macleod & Daniel Parent, 2006. "Performance Pay And Wage Inequality," Departmental Working Papers 2006-08, McGill University, Department of Economics. [Downloadable!]
    Other versions:
  4. von Wachter, Till & Bender, Stefan, 2004. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers’ Careers," IZA Discussion Papers 1348, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Dohmen, Thomas J., 2003. "Performance, Seniority and Wages: Formal Salary Systems and Individual Earnings Profiles," IZA Discussion Papers 935, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Antonio Dias da Silva & Bas van der Klaauw, . "Wage Dynamics and Promotions inside and between Firms," Tinbergen Institute Discussion Papers 06-084/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  7. Paul Oyer, 2007. "Ability and Employer Learning: Evidence from the Economist Labor Market," NBER Working Papers 12989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Simon D. Woodcock, 2005. "Heterogeneity and Learning in Labor Markets," Labor and Demography 0511012, EconWPA. [Downloadable!]
  9. Sullivan, Paul, 2008. "Empirical Evidence on Occupation and Industry Specific Human Capital," MPRA Paper 863, University Library of Munich, Germany, revised Jun 2008. [Downloadable!]
  10. Lopez-Pablos, Rodrigo A., 2007. "Health Econometric: Uncovering the Anthropometric Behavior on the Women's Labor Market," MPRA Paper 5961, University Library of Munich, Germany, revised 02 Feb 2008. [Downloadable!]
  11. Christina Gathmann & Uta Schönberg, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Stephanie Lluis, . "The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany," Working Papers 0103, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  13. Jennifer Hunt & Sonia Laszlo, 2006. "Bribery: Who Pays, Who Refuses, What Are The Payoffs?," Departmental Working Papers 2006-06, McGill University, Department of Economics. [Downloadable!]
    Other versions:
  14. Ana Ferrer & Stephanie Lluis, . "Should Workers Care About Firm Size?," Working Papers 0204, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  15. Alós-Ferrer, Carlos & Prat, Julien, 2008. "Job Market Signaling and Employer Learning," IZA Discussion Papers 3285, Institute for the Study of Labor (IZA). [Downloadable!]
  16. João Carlos Cerejeira da Silva, 2004. "Estimating the employer size-wage premium in a panel data model with comparative advantage and non-random selection," NIPE Working Papers 6/2004, NIPE - Universidade do Minho. [Downloadable!]
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