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Skill Uncertainty, Skill Accumulation, and Occupational Choice

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  • Carl Sanders

    (Washington University in St. Louis)

Abstract

Workers entering the labor market are uncertain about their skill set. Standard human capital theory assumes workers have perfect information about their skills. In this paper, I argue that skill uncertainty can explain one type of worker moves that standard human capital theory cannot: moves between jobs where they perform different kinds of tasks. I consider workers who have a multi-dimensional bundle of labor market skills and begin their careers uncertain about their skill levels. I construct a model that links learning about skills to the tasks performed in jobs: the more intensely a job uses a particular skill, the more the workers learn about their true level of that skill. The model also contains a skill accumulation motive: as workers use a skill they gain additional amounts of it. A simpliï¬Âed version of the model suggests that if skill uncertainty were the dominant force workers would switch between jobs that use skills in different ratios but similar total levels. On the other hand, if skill accumulation were the dominant force they would switch between jobs that use similar ratios of skills but higher total levels. Linking data on workers from the National Longitudinal Study of Youth 1979 with occupational characteristics from the US Department of Labor O*NET database, I show that worker mobility across different task mixes is common and I estimate the model parameters. The current results indicate that skill uncertainty explains approximately 30% of worker mobility across different task ratios.

Suggested Citation

  • Carl Sanders, 2012. "Skill Uncertainty, Skill Accumulation, and Occupational Choice," 2012 Meeting Papers 633, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:633
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    References listed on IDEAS

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    Cited by:

    1. Harris, Matthew, 2015. "The impact of body weight on occupational mobility and career development," MPRA Paper 61924, University Library of Munich, Germany.
    2. Hoffman, Mitchell & Burks, Stephen V., 2017. "Worker Overconfidence: Field Evidence and Implications for Employee Turnover and Returns from Training," IZA Discussion Papers 10794, Institute for the Study of Labor (IZA).
    3. Jonathan James, 2012. "Learning and occupational sorting," Working Paper 1225, Federal Reserve Bank of Cleveland.
    4. Fabien Postel-Vinay & Ilse Lindenlaub, 2017. "Multidimensional Sorting under Random Search," 2017 Meeting Papers 501, Society for Economic Dynamics.
    5. Pedros Silos & Eric Smith, 2015. "Human Capital Portfolios," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 635-652, July.
    6. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
    7. Tyler Ransom & Esteban Aucejo & Arnaud Maurel & Peter Arcidiacono, 2014. "College Attrition and the Dynamics of Information Revelation," 2014 Meeting Papers 529, Society for Economic Dynamics.
    8. Boehm, Christoph E. & Flaaen, Aaron & Pandalai-Nayar, Nitya, 2015. "Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tohōku Earthquake," Finance and Economics Discussion Series 2015-94, Board of Governors of the Federal Reserve System (U.S.).
    9. Jonathan James, 2011. "Ability matching and occupational choice," Working Paper 1125, Federal Reserve Bank of Cleveland.
    10. Carl Sanders & Christopher Taber, 2012. "Life-Cycle Wage Growth and Heterogeneous Human Capital," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 399-425, July.
    11. Michelle Rendall, 2011. "The Service Sector and Female Market Work: Europe vs US," 2011 Meeting Papers 778, Society for Economic Dynamics.

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