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Ability matching and occupational choice

  • Jonathan James
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    This paper develops and estimates an individual model of occupational choice and learning that allows for correlated learning across occupation-specific abilities. As an individual learns about their occupation-specific ability in one occupation, this experience will be broadly informative about their abilities in all occupations. Workers continually process their entire history of information, which they use to determine when to change careers, as well as which new career to go to. Endogenizing information in this manner has been computationally prohibitive in the past. I estimate the model in an innovative way using the Expectation and Maximization (EM) algorithm. The model is estimated on the National Longitudinal Survey of Youth 1997. The estimates suggest that both direct and indirect learning play an important role in early career wage growth, with those with the lowest levels of education achieving the largest increases.

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    Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 1125.

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    Date of creation: 2011
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    Handle: RePEc:fip:fedcwp:1125
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    1. Kate Antonovics & Limor Golan, . "Experimentation and Job Choice," GSIA Working Papers 2006-E41, Carnegie Mellon University, Tepper School of Business.
    2. Gueorgui Kambourov & Iourii Manovskii, 2008. "Rising Occupational And Industry Mobility In The United States: 1968-97," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 41-79, 02.
    3. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
    4. Christian Belzil & Jörgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," CIRANO Working Papers 2002s-19, CIRANO.
    5. Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, 07.
    6. Michael P. Keane & Kenneth I. Wolpin, 1994. "The solution and estimation of discrete choice dynamic programming models by simulation and interpolation: Monte Carlo evidence," Staff Report 181, Federal Reserve Bank of Minneapolis.
    7. Sullivan, Paul, 2006. "A Dynamic Analysis of Educational Attainment, Occupational Choices, and Job Search," MPRA Paper 3896, University Library of Munich, Germany, revised Jun 2007.
    8. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    9. 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.
    10. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
    11. Daniel A. Ackerberg, 2003. "Advertising, learning, and consumer choice in experience good markets: an empirical examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1007-1040, 08.
    12. Ronni Pavan, 2006. "Career Choice and Wage Growth," 2006 Meeting Papers 504, Society for Economic Dynamics.
    13. Carl Sanders, 2012. "Skill Uncertainty, Skill Accumulation, and Occupational Choice," 2012 Meeting Papers 633, Society for Economic Dynamics.
    14. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
    15. Johnson, William R, 1978. "A Theory of Job Shopping," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 261-78, May.
    16. Iourii Manovskii & Gueorgui Kambourov, 2004. "Occupational Specificity of Human Capital," 2004 Meeting Papers 197, Society for Economic Dynamics.
    17. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
    18. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
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