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Human Capital Portfolios

Author

Listed:
  • Pedros Silos

    (Federal Reserve Bank of Atlanta)

  • Eric Smith

    (University of Essex)

Abstract

This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor market dynamics reveal that diversification generates higher income for individuals who switch occupations whereas specialization benefits those who stick with one type of job. A human capital portfolio choice problem featuring skills, abilities, and uncertain labor outcomes replicates this general pattern and generates a sizable amount of inequality. Policy experiments illustrate that mandatory specialization generates lower average income growth, lower turnover and marginally lower inequality. (Copyright: Elsevier)

Suggested Citation

  • Pedros Silos & Eric Smith, 2015. "Human Capital Portfolios," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 635-652, July.
    • Handle: RePEc:red:issued:13-132
    DOI: 10.1016/j.red.2014.09.001
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    More about this item

    Keywords

    Human capital; Occupational choice; Income inequality;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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