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

Author

Listed:
  • Felderer, Bernhard

    (Institute for Advanced Studies, Vienna)

  • Drost, André

    (Department of Economics, University of Cologne)

Abstract

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.

Suggested Citation

  • Felderer, Bernhard & Drost, André, 2000. "Cyclical Occupational Choice in a Model with Rational Wage Expectations and Perfect Occupational Mobility," Economics Series 81, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:81
    as

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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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    References listed on IDEAS

    as
    1. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 7-36, October.
    2. Gary A. Zarkin, 1985. "Occupational Choice: An Application to the Market for Public School Teachers," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 409-446.
    3. 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.
    4. 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 265-295, October.
    5. Richard B. Freeman, 1976. "A Cobweb Model of the Supply and Starting Salary of New Engineers," ILR Review, Cornell University, ILR School, vol. 29(2), pages 236-248, January.
    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 171-179, May.
    7. 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 157-161, February.
    8. Mark C. Berger, 1988. "Predicted Future Earnings and Choice of College Major," ILR Review, Cornell University, ILR School, vol. 41(3), pages 418-429, April.
    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. Borsch-Supan, Axel, 1990. "Education and its double-edged impact on mobility," Economics of Education Review, Elsevier, vol. 9(1), pages 39-53, March.
    11. Siow, Aloysius, 1984. "Occupational Choice under Uncertainty," Econometrica, Econometric Society, vol. 52(3), pages 631-645, May.
    12. 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.
    13. 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.
    14. Mattila, J. Peter & Orazem, Peter, 1991. "Human Capital, Uncertain Wage Distributions, and Educational and Occupational Choices," Staff General Research Papers Archive 10841, Iowa State University, Department of Economics.
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    Citations

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    Cited by:

    1. Magali Jaoul, 2004. "Enseignement supérieur et marchés du travail. Analyse économétrique de la théorie de l'engorgement," Economie & Prévision, La Documentation Française, vol. 166(5), pages 39-57.
    2. Magali Jaoul-Grammare, 2006. "Cliométrie de l’engorgement en France. Evaluation théorique et empirique," Working Papers 06-07, Association Française de Cliométrie (AFC).

    More about this item

    Keywords

    Occupational choice; Rational expectations; Occupational mobility; Linear dynamics;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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