IDEAS home Printed from https://ideas.repec.org/p/red/sed009/1150.html
   My bibliography  Save this paper

Learning Your Comparative Advantages

Author

Listed:
  • Theodore Papageorgiou

    (Penn State University)

Abstract

We introduce an equilibrium labor market model, where workers gradually learn about their unobserved production abilities. While engaged in a productive activity (occupation), workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes. Because workers are learning about themselves, their output informs them not only about their productivity in their current occupation, but about their likely productivity in other occupations as well. As workers acquire more information, they self-select into the occupations in which they expect to perform best, and their wages increase. Returns to experience here capture improved job selection by workers as they sort through occupations and learn about their productive abilities. Our setup can account for the offsetting worker flows across occupations, the within-occupation wage inequality, as well the decline in the probability of occupational switching as workers grow older, that we observe in the data. We use this framework to investigate whether the interaction of learning and search frictions can lead to further decreases in output. Indeed, an increase in the unemployment rate similar to the one experienced by many European countries in the early 1970s is found to reduce the flow of output per employed worker by 1% annually.

Suggested Citation

  • Theodore Papageorgiou, 2009. "Learning Your Comparative Advantages," 2009 Meeting Papers 1150, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:1150
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2009/paper_1150.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-122, February.
    2. McCall, Brian P, 1990. "Occupational Matching: A Test of Sorts," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 45-69, February.
    3. Jesper Bager & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2006 Meeting Papers 679, Society for Economic Dynamics.
    4. Joshua C. Pinkston, 2009. "A Model of Asymmetric Employer Learning with Testable Implications," Review of Economic Studies, Oxford University Press, pages 367-394.
    5. 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.
    6. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-1055, December.
    7. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
    8. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-1120, December.
    9. 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.
    10. Jovanovic, Boyan & Moffitt, Robert, 1990. "An Estimate of a Sectoral Model of Labor Mobility," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 827-852, August.
    11. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
    12. 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.
    13. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas," Economic Policy, CEPR;CES;MSH, vol. 21(45), pages 5-59, January.
    14. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
    15. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-297, June.
    16. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
    17. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    18. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    19. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, March.
    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. Carl Sanders, 2012. "Skill Uncertainty, Skill Accumulation, and Occupational Choice," 2012 Meeting Papers 633, Society for Economic Dynamics.
    2. Theodore Papageorgiou, 2010. "Large Firms and Internal Labor Markets," 2010 Meeting Papers 1216, Society for Economic Dynamics.
    3. Yaniv Yedid-Levi & Nir Jaimovic & Henry Siu & Martin Gervais, 2011. "What Should I Be When I Grow Up? Occupations and Employment over the Life Cycle and Business Cycle," 2011 Meeting Papers 893, Society for Economic Dynamics.

    More about this item

    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:red:sed009:1150. 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: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.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.