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Sector-Specific Human Capital and the Distribution of Earnings

  • Eric Smith

This paper demonstrates the way in which assignment frictions-the limited ability of workers to find jobs in which they have a comparative advantage-affect the level and composition of human capital acquisition as well as the distribution of income. As workers become more likely to find their preferred job, they specialize more. Specialization raises expected income. It also exposes workers to a greater downside loss when the more desired employment opportunities are unavailable. More specialization thereby raises the earnings divide between those who match well and those who do not, which under some conditions leads to greater inequality. (c) 2010 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/655467
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Article provided by University of Chicago Press in its journal Journal of Human Capital.

Volume (Year): 4 (2010)
Issue (Month): 1 ()
Pages: 35-61

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Handle: RePEc:ucp:jhucap:v:4:y:2010:i:1:p:35-61
Contact details of provider: Web page: http://www.journals.uchicago.edu/JHC/

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  1. Stephen Machin & John Van Reenen, 2007. "Changes in wage inequality," LSE Research Online Documents on Economics 4667, London School of Economics and Political Science, LSE Library.
  2. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February.
  3. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
  4. Konstantinos Eleftheriou, 2008. "Matching, Specialties and Wage Inequality," Economics Bulletin, AccessEcon, vol. 10(11), pages 1-12.
  5. 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.
  6. Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
  7. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 731-759.
  8. repec:ebl:ecbull:v:10:y:2008:i:11:p:1-12 is not listed on IDEAS
  9. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
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