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Comparative Advantage, Learning, and Sectoral Wage Determination

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Author Info
Robert Gibbons
Lawrence F. Katz
Thomas Lemieux
Daniel Parent

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Abstract

We develop a model in which a worker's skills determine the worker's current wage and sector. Both 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 non-linear instrumental-variables techniques. We then apply our methodology to study the wages and allocation of workers across occupations and across industries. For both occupations and industries, we find that high-wage sectors employ high-skill workers and offer high returns to workers' skills. Estimates of these sectoral wage differences that do not account for sector-specific returns are therefore misleading. We also suggest further applications of our theory and methodology.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8889.

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Date of creation: Apr 2002
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Handle: RePEc:nbr:nberwo:8889

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J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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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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    Other versions:
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  10. 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)
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  12. 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)
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  13. 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!]
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  19. 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)
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(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. 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!]
  3. 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:
  4. Simon D Woodcock, 2002. "Agent Heterogeneity and Learning: An Application to Labor Markets," Technical Papers 2002-20, Longitudinal Employer-Household Dynamics, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  5. Oyer, Paul, 2007. "Ability and Employer Learning: Evidence from the Economist Labor Market," Research Papers 1961, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
  6. Shintaro Yamaguchi, 2009. "Career Progression and Comparative Advantage," Global COE Hi-Stat Discussion Paper Series gd08-025, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
    Other versions:
  7. 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:
  8. John S. Heywood & Daniel Parent, 2009. "Performance Pay and the White-Black Wage Gap," Cahiers de recherche 0916, CIRPEE. [Downloadable!]
    Other versions:
  9. Alós-Ferrer, Carlos & Prat, Julien, 2008. "Job Market Signaling and Employer Learning," IZA Discussion Papers 3285, Institute for the Study of Labor (IZA). [Downloadable!]
  10. 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:
  11. 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!]
  12. 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:
  13. Simon D. Woodcock, 2005. "Heterogeneity and Learning in Labor Markets," Labor and Demography 0511012, EconWPA. [Downloadable!]
  14. Daniel Parent, 2009. "The effect of pay-for-performance contracts on wages," Empirical Economics, Springer, vol. 36(2), pages 269-295, May. [Downloadable!] (restricted)
    Other versions:
  15. 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!]
  16. 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:
  17. Sullivan, Paul, 2008. "Empirical Evidence on Occupation and Industry Specific Human Capital," MPRA Paper 863, University Library of Munich, Germany, revised Jun 2008. [Downloadable!]
  18. Christina Gathmann & Uta Schönberg, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA). [Downloadable!]
  19. 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:
  20. 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:
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