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Learning Your Comparative Advantages

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  • Theodore Papageorgiou

    (Penn State University)

Abstract

We introduce an equilibrium labor market model, where workers gradually learn about their unobserved production abilities. While engaged in a productive activity (occupation), workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes. Because workers are learning about themselves, their output informs them not only about their productivity in their current occupation, but about their likely productivity in other occupations as well. As workers acquire more information, they self-select into the occupations in which they expect to perform best, and their wages increase. Returns to experience here capture improved job selection by workers as they sort through occupations and learn about their productive abilities. Our setup can account for the offsetting worker flows across occupations, the within-occupation wage inequality, as well the decline in the probability of occupational switching as workers grow older, that we observe in the data. We use this framework to investigate whether the interaction of learning and search frictions can lead to further decreases in output. Indeed, an increase in the unemployment rate similar to the one experienced by many European countries in the early 1970s is found to reduce the flow of output per employed worker by 1% annually.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 1150.

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Date of creation: 2009
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Handle: RePEc:red:sed009:1150

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  1. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  2. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  3. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Occupational Mobility and Wage Inequality," IZA Discussion Papers 1189, Institute for the Study of Labor (IZA).
  4. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  5. Acemoglu, Daron & Robinson, James A, 1999. "Inefficient Redistribution," CEPR Discussion Papers 2122, C.E.P.R. Discussion Papers.
  6. Jean-Marc Robin & Francois Fontaine & Fabien Postel-Vinay & Jesper Bagger, 2011. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2011 Meeting Papers 278, Society for Economic Dynamics.
  7. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  8. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  9. Brian P. McCall, 1988. "Occupational Matching: A Test of Sorts," Working Papers 617, Princeton University, Department of Economics, Industrial Relations Section..
  10. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, 02.
  11. Gathmann, Christina & Schönberg, Uta, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA).
  12. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  13. Kate Antonovics & Limor Golan, . "Experimentation and Job Choice," GSIA Working Papers 2006-E41, Carnegie Mellon University, Tepper School of Business.
  14. Joshua C. Pinkston, 2006. "A Model of Asymmetric Employer Learning With Testable Implications," Working Papers 390, U.S. Bureau of Labor Statistics.
  15. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Rising Occupational and Industry Mobility in the United States: 1968-1993," IZA Discussion Papers 1110, Institute for the Study of Labor (IZA).
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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. Aspen Gorry, 2012. "Experience and Worker Flows," 2012 Meeting Papers 154, Society for Economic Dynamics.
  3. Yaniv Yedid-Levi & Nir Jaimovic & Henry Siu & Martin Gervais, 2011. "What Should I Be When I Grow Up? Occupations and Employment over the Life Cycle and Business Cycle," 2011 Meeting Papers 893, Society for Economic Dynamics.
  4. Alberto Naudon, 2010. "A Stochastic Assignment Model," Working Papers Central Bank of Chile 558, Central Bank of Chile.
  5. Theodore Papageorgiou, 2010. "Large Firms and Internal Labor Markets," 2010 Meeting Papers 1216, Society for Economic Dynamics.
  6. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series 2679, CESifo Group Munich.

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