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Employer Learning and the “Importance” of Skills

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  • Audrey Light

    ()
    (Department of Economics, Ohio State University)

  • Andrew McGee

    ()
    (Department of Economics, Simon Fraser University)

Abstract

We ask whether the role of employer learning in the wage-setting process depends on skill type and skill importance to productivity. Combining data from the NLSY79 with O*NET data, we use Armed Services Vocational Aptitude Battery scores to measure seven distinct types of pre-market skills that employers cannot readily observe, and O*NET importance scores to measure the importance of each skill for the worker’s current three-digit occupation. Before bringing importance measures into the analysis, we find evidence of employer learning for each skill type, for college and high school graduates, and for blue and white collar workers. Moreover, we find that the extent of employer learning—which we demonstrate to be directly identified by magnitudes of parameter estimates after simple manipulation of the data—does not vary significantly across skill type or worker type. Once we allow parameters identifying employer learning and screening to vary by skill importance, we find evidence of distinct tradeoffs between learning and screening, and considerable heterogeneity across skill type and skill importance. For some skills, increased importance leads to more screening and less learning; for others, the opposite is true. Our evidence points to heterogeneity in the degree of employer learning that is masked by disaggregation based on schooling attainment or broad occupational categories.

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File URL: http://www.econ.ohio-state.edu/pdf/alight/wp11-02.pdf
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Bibliographic Info

Paper provided by Ohio State University, Department of Economics in its series Working Papers with number 11-02.

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Length: 36 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:osu:osuewp:11-02

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Related research

Keywords: dynamic discrete choice; latent state variables; serial correlation; sequential Monte Carlo methods; particle filtering;

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References

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  1. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2008. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," NBER Working Papers 13951, National Bureau of Economic Research, Inc.
  2. repec:bla:restud:v:76:y:2009:i:1:p:367-394 is not listed on IDEAS
  3. Flores-Lagunes, Alfonso & Light, Audrey, 2009. "Interpreting Degree Effects in the Returns to Education," IZA Discussion Papers 4169, Institute for the Study of Labor (IZA).
  4. Joshua C. Pinkston, 2006. "A test of screening discrimination with employer learning," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(2), pages 267-284, January.
  5. Hani Mansour, 2010. "Does Employer Learning Vary by Occupation?," Discussion Papers of DIW Berlin 1015, DIW Berlin, German Institute for Economic Research.
  6. Thomas J. Kane & Cecilia Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," Working Papers 798, Princeton University, Department of Economics, Industrial Relations Section..
  7. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
  8. Joshua C. Pinkston, 2009. "A Model of Asymmetric Employer Learning with Testable Implications," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 367-394.
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Cited by:
  1. Emiko Usui & Seik Kim, 2013. "Employer Learning, Job Mobility, and Wage Dynamics," 2013 Meeting Papers 912, Society for Economic Dynamics.

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