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Wages and employment: The role of occupational skills

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  • Girsberger, Esther Mirjam
  • Rinawi, Miriam
  • Krapf, Matthias

    () (University of Basel)

Abstract

How skills acquired in vocational education and training (VET) affect wages and employment is not clear. We develop and estimate a search and matching model for workers with a VET degree. Workers differ in interpersonal, cognitive and manual skills, while firms require and value different combinations of these skills. Assuming that match productivity exhibits worker-job complementarity, we estimate how interpersonal, cognitive and manual skills map into job offers, unemployment and wages. We find that firms value cognitive skills on average almost twice as much as interpersonal and manual skills, and they prize complementarity in cognitive and interpersonal skills. The average return to VET skills in hourly wages is 9%, similar to the returns to schooling. Furthermore, VET appears to improve labour market opportunities through higher job arrival rate and lower job destruction. Workers thus have large benefits from acquiring a VET degree.

Suggested Citation

  • Girsberger, Esther Mirjam & Rinawi, Miriam & Krapf, Matthias, 2018. "Wages and employment: The role of occupational skills," Working papers 2018/16, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2018/16
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    More about this item

    Keywords

    Occupational training; vocational education; labor market search; sorting; multidimensional skills;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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