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Cyclical Occupational Choice in a Model with Rational Wage Expectations and Perfect Occupational Mobility

  • Felderer, Bernhard

    (Institute for Advanced Studies, Vienna)

  • Drost, André

    (Department of Economics, University of Cologne)

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    In many professional labor markets the number of new workers follows a cyclical time path. This phenomenon is usually explained by means of a cobweb model that is based on the assumptions of myopic wage expectations and occupational immobility. Since both assumptions are questioned by the empirical literature, we develop an alternative model that is based on the assumptions of rational wage expectations and perfect occupational mobility. Depending on the production function, the model can generate cycles in the number of workers who enter a professional labor market.

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    File URL: http://www.ihs.ac.at/publications/eco/es-81.pdf
    File Function: First version, 2000
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    Paper provided by Institute for Advanced Studies in its series Economics Series with number 81.

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    Length: 22 pages
    Date of creation: Mar 2000
    Date of revision:
    Handle: RePEc:ihs:ihsesp:81
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    1. Leonard, Jonathan S, 1982. "Wage Expectations in the Labor Market: Survey Evidence on Rationality," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 157-61, February.
    2. Borsch-Supan, Axel, 1990. "Education and its double-edged impact on mobility," Economics of Education Review, Elsevier, vol. 9(1), pages 39-53, March.
    3. Richard B. Freeman, 1976. "A cobweb model of the supply and starting salary of new engineers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 29(2), pages 236-248, January.
    4. Dennis L. Hoffman & Stuart A. Low, 1983. "Rationality and the Decision to Invest in Economics," Journal of Human Resources, University of Wisconsin Press, vol. 18(4), pages 480-496.
    5. Robert J. Willis & Sherwin Rosen, 1978. "Education and Self-Selection," NBER Working Papers 0249, National Bureau of Economic Research, Inc.
    6. Freeman, Richard B, 1975. "Legal "Cobwebs": A Recursive Model of the Market for New Lawyers," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 171-79, May.
    7. Zarkin, Gary A., 1983. "Cobweb versus rational expectations models : Lessons from the market for public school teachers," Economics Letters, Elsevier, vol. 13(1), pages 87-95.
    8. Siow, Aloysius, 1984. "Occupational Choice under Uncertainty," Econometrica, Econometric Society, vol. 52(3), pages 631-45, May.
    9. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
    10. Mark C. Berger, 1988. "Predicted future earnings and choice of college major," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(3), pages 418-429, April.
    11. Dolton, Peter J & Kidd, Michael P, 1998. "Job Changes, Occupational Mobility and Human Capital Acquisition: An Empirical Analysis," Bulletin of Economic Research, Wiley Blackwell, vol. 50(4), pages 265-95, October.
    12. Mattila, J. Peter & Orazem, Peter, 1991. "Human Capital, Uncertain Wage Distributions, and Educational and Occupational Choices," Staff General Research Papers 10841, Iowa State University, Department of Economics.
    13. Zarkin, Gary A, 1985. "Occupational Choice: An Application to the Market for Public School Teachers," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 409-46, May.
    14. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
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