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Comparative Advantage, Learning, and Sectoral Wage Determination

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  • Robert Gibbons
  • Lawrence F. Katz
  • Thomas Lemieux
  • Daniel Parent

Abstract

We develop a model in which a worker’s skills determine the worker’s current wage and sector. The market and the worker are initially uncertain about some of the worker’s skills. Endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills. We show how the model can be estimated using nonlinear instrumental variables techniques. We apply our methodology to study wages and allocation of workers across occupations and industries using individual†level panel data from the National Longitudinal Survey of Youth. We find that high†wage sectors employ high†skill workers and offer high returns to workers’ skills.
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Suggested Citation

  • Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2002. "Comparative Advantage, Learning, and Sectoral Wage Determination," CIRANO Working Papers 2002s-35, CIRANO.
  • Handle: RePEc:cir:cirwor:2002s-35
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    References listed on IDEAS

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    More about this item

    Keywords

    comparative advantage; learning; non-linear instrumental variables; avantages comparés; apprentissage; variables instrumentales;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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