IDEAS home Printed from
   My bibliography  Save this paper

Dynamic Skills Acquisition Choice - Jacks of All Trades vs. Dab Hands


  • Andrei Sarychev

    (Massachusetts Institute of Technology)


This paper proposes a dynamic theory of adjustment of labor force to a shock that makes existing human capital stock obsolete. Workers will not invest in the new, superior skills because their current value depends on the existing complementary stock of human capital, and the obsolete specialized skills are largely incompatible with the new specialized skills. Labor market imperfections make the current distribution of skills a factor in the decision to invest in new skills. This creates room for generalists, workers with an intermediate set of skills who are able to work with both old and new types. Along the equilibrium path the economy accumulates a buffer stock of generalists that eventually makes it profitable to invest in superior specialization. Instead of focusing on steady states, the paper proposes new methods of studying the short-run adjustment in search models with forward-looking investment. It characterizes the dynamics of transition and analyzes how equilibrium paths differ across countries with diverse labor market and educational institutions. The efficiency analysis allows drawing policy implications. Econometric evidence on labor markets in transition economies is shown to be broadly consistent with predictions of the model. East Germany presents a stark example of rapid transition that is difficult to explain by traditional theories but is consistent with the predictions of my model.

Suggested Citation

  • Andrei Sarychev, 2000. "Dynamic Skills Acquisition Choice - Jacks of All Trades vs. Dab Hands," Econometric Society World Congress 2000 Contributed Papers 1646, Econometric Society.
  • Handle: RePEc:ecm:wc2000:1646

    Download full text from publisher

    File URL:
    File Function: main text
    Download Restriction: no

    References listed on IDEAS

    1. Sethi, Rajiv, 2000. "Stability of Equilibria in Games with Procedurally Rational Players," Games and Economic Behavior, Elsevier, vol. 32(1), pages 85-104, July.
    2. Eric Friedman & Scott Shenker, 1998. "Learning and Implementation on the Internet," Departmental Working Papers 199821, Rutgers University, Department of Economics.
    3. Osborne, Martin J & Rubinstein, Ariel, 1998. "Games with Procedurally Rational Players," American Economic Review, American Economic Association, vol. 88(4), pages 834-847, September.
    4. Lehrer Ehud, 1994. "Finitely Many Players with Bounded Recall in Infinitely Repeated Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 390-405, November.
    5. Aumann, Robert J. & Sorin, Sylvain, 1989. "Cooperation and bounded recall," Games and Economic Behavior, Elsevier, vol. 1(1), pages 5-39, March.
    6. James Dow, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 1-14.
    7. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    8. Gilboa, Itzhak & Schmeidler, David, 1996. "Case-Based Optimization," Games and Economic Behavior, Elsevier, vol. 15(1), pages 1-26, July.
    9. Eric Friedman & Scott Shenker & Amy Greenwald, 1998. "Learning in Networks Contexts: Experimental Results from Simulations," Departmental Working Papers 199825, Rutgers University, Department of Economics.
    10. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July.
    11. Ellison, Glenn, 1997. "Learning from Personal Experience: One Rational Guy and the Justification of Myopia," Games and Economic Behavior, Elsevier, vol. 19(2), pages 180-210, May.
    12. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    13. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    14. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, vol. 64(4), pages 943-956, July.
    15. Lehrer, Ehud, 1988. "Repeated games with stationary bounded recall strategies," Journal of Economic Theory, Elsevier, vol. 46(1), pages 130-144, October.
    16. Sabourian, Hamid, 1998. "Repeated games with M-period bounded memory (pure strategies)," Journal of Mathematical Economics, Elsevier, vol. 30(1), pages 1-35, August.
    17. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    18. Chen, Yan, 1992. "Asynchrony and Learning in Serial and Average Cost Pricing Mechanisms: An Experimental Study," Discussion Paper Serie A 592, University of Bonn, Germany.
    19. Hurkens Sjaak, 1995. "Learning by Forgetful Players," Games and Economic Behavior, Elsevier, vol. 11(2), pages 304-329, November.
    20. Sendhil Mullainathan, 2002. "A Memory-Based Model of Bounded Rationality," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 735-774.
    21. Aner Sela & Dorothea Herreiner, 1999. "Fictitious play in coordination games," International Journal of Game Theory, Springer;Game Theory Society, vol. 28(2), pages 189-197.
    22. Sarin, Rajiv & Vahid, Farshid, 1999. "Payoff Assessments without Probabilities: A Simple Dynamic Model of Choice," Games and Economic Behavior, Elsevier, vol. 28(2), pages 294-309, August.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1646. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.