Occupational Choice and the E¤ects of Skill Supply on Relative Wages
It is shown that an economy where agents with one dimensional skill choose among occupations as intermediate complementary inputs with di¤erent learning costs has an equilibrium hierarchy from the lowest cost/skill/wage occupations to the highest which agents will cascade along away from the skill level of new entrants. This can explain why di¤erently/similarly skilled agents act like comple- ments/substitutes. The distinction between lifetime wages including the learning cost and current wages implies a more elastic e¤ect of immigration, but a more inelastic e¤ect of the minimum wage. These conclusions don?t rely on the typical assumptions of scale, preferences, or comparative advantage.
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95-5, Brown University, Department of Economics.
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