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Experimentation and Job Choice

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In most models in which firms and workers learn about worker productivity through repeated observations of on-the-job performance, the amount of information revealed about workers is exogenously given and constant across jobs. In this paper, we examine what happens when the amount of information gathered about workers can be altered by assigning workers to different jobs. We show that informational differences across jobs naturally give rise to experimentation. That is, there is a trade off between current period output in order assign workers to jobs that reveal a substantial amount of information workers’ skills. We find that while experimentation is the most valuable when workers are young and inexperienced, the optimal level of experimentation is initially very small, rises as workers gain experience and then eventually declines. As a result, our model suggests that wage growth may be driven partly by a decline in experimentation as workers age. We also show that random productivity shocks can have long-lasting and, in some cases, permanent effects on both wages and wage growth.

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Bibliographic Info

Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2006-E41.

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Handle: RePEc:cmu:gsiawp:-1768369455

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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
Web page: http://www.tepper.cmu.edu/

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Web: http://student-3k.tepper.cmu.edu/gsiadoc/GSIA_WP.asp

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Cited by:
  1. Carl Sanders, 2012. "Skill Uncertainty, Skill Accumulation, and Occupational Choice," 2012 Meeting Papers 633, Society for Economic Dynamics.
  2. Theodore Papageorgiou, 2009. "Learning Your Comparative Advantages," 2009 Meeting Papers 1150, Society for Economic Dynamics.
  3. Jonathan James, 2012. "Learning and occupational sorting," Working Paper 1225, Federal Reserve Bank of Cleveland.
  4. Theodore Papageorgiou, 2010. "Large Firms and Internal Labor Markets," 2010 Meeting Papers 1216, Society for Economic Dynamics.
  5. Stefanie Brilon, 2010. "Job Assignment with Multivariate Skills," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_25, Max Planck Institute for Research on Collective Goods.
  6. Jonathan James, 2011. "Ability matching and occupational choice," Working Paper 1125, Federal Reserve Bank of Cleveland.

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