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A Dynamic Analysis of Educational Attainment, Occupational Choices, and Job Search

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  • Sullivan, Paul

Abstract

This paper examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices. Individuals in the model decide when to attend school and when to move between firms and occupations over the course of their career. Workers search for suitable wage and non-pecuniary match values at firms across occupations given their heterogeneous skill endowments and preferences for employment in each occupation. Over the course of their careers workers endogenously accumulate firm and occupation specific human capital that affects wages differently across occupations. The parameters of the model are estimated with simulated maximum likelihood using data from the 1979 cohort of the National Longitudinal Survey of Youth. The structural parameter estimates reveal that both self-selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital. Eliminating the gains from matching between workers and occupations would reduce total wages by 30%, eliminating the gains from job search would reduce wages by 19%, and eliminating the effects of firm and occupation specific human capital on wages would reduce wages by only 2.7%.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 861.

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Date of creation: Sep 2006
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Handle: RePEc:pra:mprapa:861

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Keywords: occupational choice; job search; human capital; dynamic programming models;

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Citations

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Cited by:
  1. Adda, Jerome & Dustmann, Christian & Meghir, Costas & Robin, Jean-Marc, 2007. "Career Progression and Formal versus On-the-Job Training," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6087, C.E.P.R. Discussion Papers.
  2. Peter Arcidiacono & Paul B. Ellickson, 2011. "Practical Methods for Estimation of Dynamic Discrete Choice Models," Annual Review of Economics, Annual Reviews, Annual Reviews, vol. 3(1), pages 363-394, 09.
  3. Jerome Adda & Christian Dustmann & Costas Meghir & Jean-Marc Robin, 2013. "Career Progression, Economic Downturns, and Skills," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1889, Cowles Foundation for Research in Economics, Yale University.
  4. A Aggarwal & R Freguglia & G Johnes & G Spricigo, 2011. "Education and labour market outcomes : evidence from India," Working Papers 615663, Lancaster University Management School, Economics Department.
  5. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, Elsevier, Elsevier.
  6. Jonathan James, 2011. "Ability matching and occupational choice," Working Paper 1125, Federal Reserve Bank of Cleveland.
  7. Paul Sullivan & Ted To, 2011. "Search and Non-Wage Job Characteristics," Working Papers, U.S. Bureau of Labor Statistics 449, U.S. Bureau of Labor Statistics.
  8. Erhan Artuc, 2009. "Intergenerational Effects of Trade Liberalization," 2009 Meeting Papers, Society for Economic Dynamics 870, Society for Economic Dynamics.
  9. Sullivan, Paul, 2006. "Interpolating Value Functions in Discrete Choice Dynamic Programming Models," MPRA Paper 864, University Library of Munich, Germany.
  10. Ronni Pavan & Josh Kinsler, 2012. "The Specificity of General Human Capital: Evidence from College Major Choice," 2012 Meeting Papers, Society for Economic Dynamics 1036, Society for Economic Dynamics.

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