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Formation of Heterogeneous Skills and Wage Growth

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  • Shintaro Yamaguchi

Abstract

This paper examines how primitive skills associated with occupations are formed and rewarded in the labor market over the careers of men. The objective task complexity measurement from the Dictionary of Occupational Titles enables a more direct look into the primitive skills of workers. I show that the optimal choice of task complexity is a linear function of unobserved skills, worker characteristics, and preference shocks, which implies that the observed task complexity is a noisy signal of underlying skills. Using career histories from the NLSY79, the growth of cognitive and motor skills as well as structural parameters are estimated by the Kalman filter. The results indicate that both cognitive and motor skills account for a considerable amount of cross-sectional wage variation. I also find that cognitive skills grow over careers and are the main source of wage growth; this pattern is particularly pronounced for the highly educated. In contrast, motor skills grow and contribute to wage growth substantially only for high school dropouts.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-088.

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Date of creation: Sep 2009
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Handle: RePEc:hst:ghsdps:gd09-088

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  1. Ronni Pavan, 2011. "Career Choice and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 549 - 587.
  2. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-23, April.
  3. Uta Schönberg, 2007. "Wage Growth Due to Human Capital Accumulation and Job Search: A Comparison between the United States and Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(4), pages 562-586, July.
  4. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
  5. Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys 1984-2000," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20083, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  6. Paul Sullivan, 2009. "Estimation of an Occupational Choice Model when Occupations are Misclassified," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
  7. Sullivan, Paul, 2010. "Empirical evidence on occupation and industry specific human capital," Labour Economics, Elsevier, vol. 17(3), pages 567-580, June.
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