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Employer Learning and the “Importance” of Skills

Author

Listed:
  • Audrey Light

    () (Department of Economics, Ohio State University)

  • Andrew McGee

    () (Department of Economics, Simon Fraser University)

Abstract

We ask whether the role of employer learning in the wage-setting process depends on skill type and skill importance to productivity. Combining data from the NLSY79 with O*NET data, we use Armed Services Vocational Aptitude Battery scores to measure seven distinct types of pre-market skills that employers cannot readily observe, and O*NET importance scores to measure the importance of each skill for the worker’s current three-digit occupation. Before bringing importance measures into the analysis, we find evidence of employer learning for each skill type, for college and high school graduates, and for blue and white collar workers. Moreover, we find that the extent of employer learning—which we demonstrate to be directly identified by magnitudes of parameter estimates after simple manipulation of the data—does not vary significantly across skill type or worker type. Once we allow parameters identifying employer learning and screening to vary by skill importance, we find evidence of distinct tradeoffs between learning and screening, and considerable heterogeneity across skill type and skill importance. For some skills, increased importance leads to more screening and less learning; for others, the opposite is true. Our evidence points to heterogeneity in the degree of employer learning that is masked by disaggregation based on schooling attainment or broad occupational categories.

Suggested Citation

  • Audrey Light & Andrew McGee, 2011. "Employer Learning and the “Importance” of Skills," Working Papers 11-02, Ohio State University, Department of Economics.
  • Handle: RePEc:osu:osuewp:11-02
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    File URL: http://www.econ.ohio-state.edu/pdf/alight/wp11-02.pdf
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    References listed on IDEAS

    as
    1. Light, Audrey, 1998. "Estimating Returns to Schooling: When Does the Career Begin?," Economics of Education Review, Elsevier, vol. 17(1), pages 31-45, February.
    2. Patrick J. Bayer & Peter Arcidiacono & Aurel Hizmo, 2010. "Web Appendix: Beyond Signaling and Human Capital: Education and the Revelation of Ability," Working Papers 10-52, Duke University, Department of Economics.
    3. Alfonso Flores-Lagunes & Audrey Light, 2010. "Interpreting Degree Effects in the Returns to Education," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    4. Thomas J. Kane & Cecilia Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," Working Papers 798, Princeton University, Department of Economics, Industrial Relations Section..
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    6. Bauer, Thomas K. & Haisken-DeNew, John P., 2001. "Employer learning and the returns to schooling," Labour Economics, Elsevier, vol. 8(2), pages 161-180, May.
    7. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1-53.
    8. Kate Antonovics & Limor Golan, 2012. "Experimentation and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 333-366.
    9. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 227-252, October.
    10. Joshua C. Pinkston, 2009. "A Model of Asymmetric Employer Learning with Testable Implications," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 367-394.
    11. Hani Mansour, 2012. "Does Employer Learning Vary by Occupation?," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 415-444.
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    13. Light, Audrey & McGee, Andrew, 2015. "Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined," Labour Economics, Elsevier, vol. 32(C), pages 57-66.
    14. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
    15. 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.
    16. Thomas J. Kane & Cecilia Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," Working Papers 798, Princeton University, Department of Economics, Industrial Relations Section..
    17. 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.
    18. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
    19. Joshua C. Pinkston, 2006. "A Test of Screening Discrimination with Employer Learning," ILR Review, Cornell University, ILR School, vol. 59(2), pages 267-284, January.
    20. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    21. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
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    Citations

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    Cited by:

    1. Urgiles Bravo, Maria Gabriela, 2014. "Employer learning and statistical discrimination: a comparison of hispanic and white males," Master's Theses 180417, University of Minnesota, Department of Applied Economics.
    2. Araki, Shota & Kawaguchi, Daiji & Onozuka, Yuki, 2016. "University prestige, performance evaluation, and promotion: Estimating the employer learning model using personnel datasets," Labour Economics, Elsevier, vol. 41(C), pages 135-148.
    3. repec:bla:obuest:v:79:y:2017:i:5:p:654-688 is not listed on IDEAS
    4. Light, Audrey & McGee, Andrew, 2015. "Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined," Labour Economics, Elsevier, vol. 32(C), pages 57-66.
    5. Lundin, Martin & Nordström Skans, Oskar & Zetterberg, Pär, 2016. "Leadership experiences, labor market entry, and early career trajectories," Working Paper Series 2016:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    6. Emiko Usui & Seik Kim, 2013. "Employer Learning, Job Mobility, and Wage Dynamics," 2013 Meeting Papers 912, Society for Economic Dynamics.
    7. Torberg Falch & Astrid Marie Jorde Sandsør & Bjarne Strøm, 2017. "Do Smaller Classes Always Improve Students’ Long-run Outcomes?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 654-688, October.

    More about this item

    Keywords

    dynamic discrete choice; latent state variables; serial correlation; sequential Monte Carlo methods; particle filtering;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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