IDEAS home Printed from https://ideas.repec.org/p/fip/fedawp/2012-03.html
   My bibliography  Save this paper

Human capital portfolios

Author

Listed:
  • Silos, Pedro
  • Smith, Eric

Abstract

This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor-market dynamics reveal that diversification generates higher income growth for individuals who switch occupations whereas specialization benefits those who stick with one type of job. A human capital portfolio choice problem featuring skills, abilities, and uncertain labor outcomes replicates this general pattern and generate a sizable amount of inequality. Policy experiments illustrate that forced specialization generates lower average income growth and lower turnover, but also lower inequality.

Suggested Citation

  • Silos, Pedro & Smith, Eric, 2012. "Human capital portfolios," FRB Atlanta Working Paper 2012-03, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2012-03
    as

    Download full text from publisher

    File URL: http://www.frbatlanta.org/documents/pubs/wp/wp1203.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
    2. Robst, John, 2007. "Education and job match: The relatedness of college major and work," Economics of Education Review, Elsevier, vol. 26(4), pages 397-407, August.
    3. Ofer Malamud, 2010. "Breadth versus Depth: The Timing of Specialization in Higher Education," LABOUR, CEIS, vol. 24(4), pages 359-390, December.
    4. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
    5. Todd Schoellman, 2010. "The Occupations and Human Capital of U.S. Immigrants," Journal of Human Capital, University of Chicago Press, vol. 4(1), pages 1-34.
    6. Theodore Papageorgiou, 2011. "Worker Sorting and Agglomeration Economies," 2011 Meeting Papers 660, Society for Economic Dynamics.
    7. Ralph Stinebrickner & Todd Stinebrickner, 2014. "Academic Performance and College Dropout: Using Longitudinal Expectations Data to Estimate a Learning Model," Journal of Labor Economics, University of Chicago Press, vol. 32(3), pages 601-644.
    8. Ralph Stinebrickner & Todd R. Stinebrickner, 2014. "A Major in Science? Initial Beliefs and Final Outcomes for College Major and Dropout," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 426-472.
    9. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    10. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
    11. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1-53.
    12. Kate Antonovics & Limor Golan, 2012. "Experimentation and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 333-366.
    13. Fane Groes & Philipp Kircher & Iourii Manovskii, 2015. "The U-Shapes of Occupational Mobility," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 659-692.
    14. Carl Sanders, 2012. "Skill Uncertainty, Skill Accumulation, and Occupational Choice," 2012 Meeting Papers 633, Society for Economic Dynamics.
    15. Bordon, Paola & Fu, Chao, 2015. "College-Major Choice to College-Then-Major Choice," MPRA Paper 79643, University Library of Munich, Germany.
    16. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
    17. Gervais, Martin & Livshits, Igor & Meh, Césaire, 2008. "Uncertainty and the specificity of human capital," Journal of Economic Theory, Elsevier, vol. 143(1), pages 469-498, November.
    18. Mark Huggett & Gustavo Ventura & Amir Yaron, 2011. "Sources of Lifetime Inequality," American Economic Review, American Economic Association, vol. 101(7), pages 2923-2954, December.
    19. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 731-759.
    20. Paul Sullivan, 2010. "A Dynamic Analysis Of Educational Attainment, Occupational Choices, And Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 289-317, February.
    21. Neal, Derek, 1999. "The Complexity of Job Mobility among Young Men," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 237-261, April.
    22. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
    23. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    24. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-1120, December.
    25. Edward P. Lazear, 2009. "Firm-Specific Human Capital: A Skill-Weights Approach," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 914-940, October.
    26. Gary S. Becker, 1994. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition)," NBER Books, National Bureau of Economic Research, Inc, number beck94-1, January.
    27. Christina Gathmann & Uta Schönberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, January.
    28. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    29. Carl Sanders & Christopher Taber, 2012. "Life-Cycle Wage Growth and Heterogeneous Human Capital," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 399-425, July.
    30. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    31. Theodore Papageorgiou, 2014. "Learning Your Comparative Advantages," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1263-1295.
    32. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-963, December.
    33. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    34. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
    35. Heckman, James J & Sedlacek, Guilherme L, 1990. "Self-selection and the Distribution of Hourly Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 329-363, January.
    36. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michelle Rendall & Andrew Rendall, 2013. "Math Matters: Student Ability, College Majors, and Wage Inequality," 2013 Meeting Papers 1196, Society for Economic Dynamics.
    2. Luc Bridet & Margaret Leighton, 2015. "The Major Decision: Labor Market Implications of the Timing of Specialization in College," Discussion Paper Series, Department of Economics 201510, Department of Economics, University of St. Andrews.
    3. repec:eee:labeco:v:51:y:2018:i:c:p:97-107 is not listed on IDEAS
    4. Josh Kinsler & Ronni Pavan, 2015. "The Specificity of General Human Capital: Evidence from College Major Choice," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 933-972.
    5. Bordon, Paola & Fu, Chao, 2015. "College-Major Choice to College-Then-Major Choice," MPRA Paper 79643, University Library of Munich, Germany.
    6. repec:oup:restud:v:82:y:2015:i:4:p:1247-1288. is not listed on IDEAS
    7. Guy Tchuente, 2016. "High School Human Capital Portfolio and College Outcomes," Journal of Human Capital, University of Chicago Press, vol. 10(3), pages 267-302.
    8. Margaret Leighton & Jamin Speer, 2017. "Labor Market Returns to College Major Specificity," Discussion Paper Series, Department of Economics 201709, Department of Economics, University of St. Andrews, revised 21 Dec 2017.
    9. Masashi Tanaka, 2018. "Changing demand for general skills, technological uncertainty, and economic growth," Discussion Papers in Economics and Business 18-02, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. Canadian Macro Study Group

    Statistics

    Access and download statistics

    Corrections

    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:fip:fedawp:2012-03. 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: (Elaine Clokey). General contact details of provider: http://edirc.repec.org/data/frbatus.html .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.