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Occupational Mobility and Wage Inequality

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  • Gueorgui Kambourov
  • Iourii Manovskii

Abstract

In this article we argue that wage inequality and occupational mobility are intimately related. We are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the U.S. was as high as 16% a year in the early 1970's and had increased to 21% by the mid-1990's. We develop a general equilibrium model with occupation-specific human capital and heterogeneous experience levels within occupations. We find that the model, calibrated to match the level of occupational mobility in the 1970's, accounts quite well for the level of (within-group) wage inequality in that period. Next, we find that the model, calibrated to match the increase in occupational mobility, accounts for over 90% of the increase in wage inequality between the 1970's and the 1990's. The theory is also quantitatively consistent with the level and increase in the short-term variability of earnings. Copyright , Wiley-Blackwell.

Suggested Citation

  • Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 731-759.
    • Handle: RePEc:oup:restud:v:76:y:2009:i:2:p:731-759
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00535.x
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    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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