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Skill Uncertainty, Skill Accumulation, and Occupational Choice

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  • Carl Sanders

    (Washington University in St. Louis)

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    Abstract

    Workers entering the labor market are uncertain about their skill set. Standard human capital theory assumes workers have perfect information about their skills. In this paper, I argue that skill uncertainty can explain one type of worker moves that standard human capital theory cannot: moves between jobs where they perform different kinds of tasks. I consider workers who have a multi-dimensional bundle of labor market skills and begin their careers uncertain about their skill levels. I construct a model that links learning about skills to the tasks performed in jobs: the more intensely a job uses a particular skill, the more the workers learn about their true level of that skill. The model also contains a skill accumulation motive: as workers use a skill they gain additional amounts of it. A simpliï¬Âed version of the model suggests that if skill uncertainty were the dominant force workers would switch between jobs that use skills in different ratios but similar total levels. On the other hand, if skill accumulation were the dominant force they would switch between jobs that use similar ratios of skills but higher total levels. Linking data on workers from the National Longitudinal Study of Youth 1979 with occupational characteristics from the US Department of Labor O*NET database, I show that worker mobility across different task mixes is common and I estimate the model parameters. The current results indicate that skill uncertainty explains approximately 30% of worker mobility across different task ratios.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 633.

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    Date of creation: 2012
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    Handle: RePEc:red:sed012:633

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    14. Philipp Kircher & Iourii Manovski & Fane Nadja Groes, 2009. "The U-Shapes of Occupational Mobility," 2009 Meeting Papers 26, Society for Economic Dynamics.
    15. Fatih Guvenen & Anthony Smith, 2010. "Inferring labor income risk from economic choices: an indirect inference approach," Staff Report 450, Federal Reserve Bank of Minneapolis.
    16. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
    17. Theodore Papageorgiou, 2009. "Learning Your Comparative Advantages," 2009 Meeting Papers 1150, Society for Economic Dynamics.
    18. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
    19. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers W04/28, Institute for Fiscal Studies.
    20. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
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