Creator: Guvenen, Fatih and Kuruscu, Burhanettin Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 427 Abstract:
In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate human capital, which is the main source of wage inequality in this model. We examine the response of this model to skill-biased technical change (SBTC), which is modeled as an increase in the trend growth rate of the price of human capital starting in the early 1970s. The model displays behavior that is consistent with several important trends observed in the US data, including the rise in overall wage inequality; the fall and subsequent rise in the college premium, as well as the fact that this behavior was most pronounced for younger workers; the rise in within-group inequality; the stagnation in median wage growth; and the small rise in consumption inequality despite the large rise in wage inequality. We consider different scenarios regarding how individuals’ expectations evolve during SBTC. Specifically, we study the case where individuals immediately realize the advent of SBTC (perfect foresight), and the case where they initially underestimate the future growth of the price of human capital (pessimistic priors), but learn the truth in a Bayesian fashion over time. Lack of perfect foresight appears to have little effect on the main results of the paper. Overall, the model shows promise for explaining a diverse set of wage distribution trends observed since the 1970s in a unifying human capital framework.
学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, E21 - Macroeconomics: Consumption; Saving; Wealth, J31 - Wage Level and Structure; Wage Differentials, and E25 - Aggregate Factor Income Distribution
Creator: Kleiner, Morris and Soltas, Evan J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 590 Abstract:
We assess the welfare consequences of occupational licensing for workers and consumers. We estimate a model of labor market equilibrium in which licensing restricts labor supply but also affects labor demand via worker quality and selection. On the margin of occupations licensed differently between U.S. states, we find that licensing raises wages and hours but reduces employment. We estimate an average welfare loss of 12 percent of occupational surplus. Workers and consumers respectively bear 70 and 30 percent of the incidence. Higher willingness to pay offsets 80 percent of higher prices for consumers, and higher wages compensate workers for 60 percent of the cost of mandated investment in occupation-specific human capital.
关键词: Welfare analysis, Labor supply, Human capital, and Occupational licensing 学科: K31 - Labor Law, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J38 - Wages, Compensation, and Labor Costs: Public Policy, D61 - Allocative Efficiency; Cost-Benefit Analysis, and J44 - Professional Labor Markets; Occupational Licensing
Creator: Kahn, Charles M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 266 Abstract:
In this article we use the techniques developed in examining optimal contracting with imperfect information to build a simple equilibrium model of a labor market with imperfect information. We then use the model to examine the effects that imperfect information imposes on labor markets, particularly when compared with full information and noncontractual base lines. We demonstrate that quits increase in periods of high output, without postulating exogenous price rigidity.
关键词: Spot markets, Job search, Information, Job change, Quitter, and Employment 学科: D80 - Information, Knowledge, and Uncertainty: General and J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Creator: Pastorino, Elena Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 469 Abstract:
This paper develops and structurally estimates a labor market model that integrates job assignment, learning, and human capital acquisition to account for the main patterns of careers in firms. A key innovation is that the model incorporates workers’ job mobility within and between firms, and the possibility that, through job assignment, firms affect the rate at which they acquire information about workers. The model is estimated using longitudinal administrative data on managers from one U.S. firm in a service industry (the data of Baker, Gibbs, and Holmström (1994a,b)) and fits the data remarkably well. The estimated model is used to assess both the direct effect of learning on wages and its indirect effect through its impact on the dynamics of job assignment. Consistent with the evidence in the literature on comparative advantage and learning, the estimated direct effect of learning on wages is found to be small. Unlike in previous work, by jointly estimating the dynamics of beliefs, jobs, and wages imposing all of the model restrictions, the impact of learning on job assignment can be uncovered and the indirect effect of learning on wages explicitly assessed. The key finding of the paper is that the indirect effect of learning on wages is substantial: overall learning accounts for one quarter of the cumulative wage growth on the job during the first seven years of tenure. Nearly all of the remaining growth is from human capital acquisition. A related novel finding is that the experimentation component of learning is a primary determinant of the timing of promotions and wage increases. Along with persistent uncertainty about ability, experimentation is responsible for substantially compressing wage growth at low tenures.
关键词: Experimentation, Job Mobility, Bandit, Careers, Wage Growth, and Human Capital 学科: J62 - Job, Occupational, and Intergenerational Mobility; Promotion, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J44 - Professional Labor Markets; Occupational Licensing, D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness, D22 - Firm Behavior: Empirical Analysis, and J31 - Wage Level and Structure; Wage Differentials
Creator: Fernandez, Raquel, 1959- and Fogli, Alessandra Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 361 Abstract:
We study the effect of culture on important economic outcomes by using the 1970 census to examine the work and fertility behavior of women born in the U.S. but whose parents were born elsewhere. We use past female labor force participation and total fertility rates from the country of ancestry as our cultural proxies. These variables should capture, in addition to past economic and institutional conditions, the beliefs commonly held about the role of women in society (i.e., culture). Given the different time and place, only the beliefs embodied in the cultural proxies should be potentially relevant. We show that these cultural proxies have positive and significant explanatory power for individual work and fertility outcomes, even after controlling for possible indirect effects of culture. We examine alternative hypotheses for these positive correlations and show that neither unobserved human capital nor networks are likely to be responsible.
关键词: Female labor force participation, Immigrants, Networks, Neighborhoods, Fertility, Cultural transmission, and Family 学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J13 - Fertility; Family Planning; Child Care; Children; Youth, J22 - Time Allocation and Labor Supply, J16 - Economics of Gender; Non-labor Discrimination, and Z13 - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
Creator: Huggett, Mark and Kaplan, Greg Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 448 Abstract:
We provide theory for calculating bounds on both the value of an individual’s human capital and the return on an individual’s human capital, given knowledge of the process governing earnings and financial asset returns. We calculate bounds using U.S. data on male earnings and financial asset returns. The large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose. However, when aggregate shocks are the only source of earnings risk, both bounds are tight.
关键词: Value of human capital, Asset pricing, and Return on human capital 学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: He, Hui and Liu, Zheng Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 644 Abstract:
Wage inequality between education groups in the United States has increased substantially since the early 1980s. The relative number of college-educated workers has also increased dramatically in the postwar period. This paper presents a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment-specific technological change. Working through equipment-skill complementarity and endogenous skill accumulation, the model does well in capturing the steady growth in the relative quantity of skilled labor during the postwar period and the substantial rise in wage inequality after the early 1980s. Based on the calibrated model, we examine the quantitative effects of some hypothetical tax-policy reforms on skill accumulation, wage inequality, and welfare.
关键词: Skill premium, Capital-skill complementarity, Investment-specific technological change, and Skill accumulation 学科: O33 - Technological Change: Choices and Consequences; Diffusion Processes, E25 - Aggregate Factor Income Distribution, J31 - Wage Level and Structure; Wage Differentials, and J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Creator: Pastorino, Elena Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 482 Abstract:
In order to analyze careers both within and across firms, this paper proposes a matching model of the labor market that extends existing models of job assignment and learning about workers’ abilities. The model accounts for worker mobility across jobs and firms, for varying degrees of generality of ability, and for the possibility that firms affect the information they acquire about workers through job assignment. I characterize equilibrium assignment and wages, and show how, depending on how abilities and jobs are distributed across firms, equilibrium gives rise to widely varying patterns of job mobility within firms and turnover across firms, even if matching would be perfectly assortative in the absence of uncertainty. The implied job and wage dynamics display features that are consistent with a broad set of empirical findings on careers in firms and the labor market. In particular, workers can experience gradual promotions and wage increases following successful performance but few or no demotions when employed by the same firm. The model also produces turnover across firms and occupations after both successful and unsuccessful experiences, leading to wage increases or decreases following a firm or occupation change. Overall, the results in this paper provide a unified framework in which to interpret the dynamics of jobs and wages in firms and the labor market.
关键词: Learning, Matching, Careers in firms, and Turnover 学科: J62 - Job, Occupational, and Intergenerational Mobility; Promotion, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, and J31 - Wage Level and Structure; Wage Differentials
Creator: Filson, Darren, 1969- and Franco, April Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 272 Abstract:
In high-tech industries, one important method of diffusion is through employee mobility: many of the entering firms are started by employees from incumbent firms using some of their former employers’ technological know-how. This paper explores the effect of incorporating this mechanism in a general industry framework by allowing employees to imitate their employers’ know-how. The equilibrium is Pareto optimal since the employees “pay” for the possibility of learning their employers’ know-how. The model’s implications are consistent with data from the rigid disk drive industry. These implications concern the effects of know-how on firm formation and survival.
关键词: Innovation, Industry Dynamics, Spinout, Research and Development, Diffusion, Techonological Change, and Rigid Disk Drive 学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, L63 - Microelectronics; Computers; Communications Equipment, and O31 - Innovation and Invention: Processes and Incentives
Creator: Guvenen, Fatih, Kuruscu, Burhanettin, Tanaka, Satoshi, and Wiczer, David Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 729 Abstract:
What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions. This measure is based on the discrepancy between the portfolio of skills required by an occupation and the portfolio of abilities possessed by a worker for learning those skills. This measure arises naturally in a dynamic model of occupational choice and human capital accumulation with multidimensional skills and Bayesian learning about one’s ability to learn these skills. In this model, mismatch is central to the career outcomes of workers: it reduces the returns to occupational tenure, and it predicts occupational switching behavior. We construct our empirical analog by combining data from the National Longitudinal Survey of Youth 1979 (NLSY79), the Armed Services Vocational Aptitude Battery (ASVAB) on workers, and the O*NET on occupations. Our empirical results show that the effects of mismatch on wages are large and persistent: mismatch in occupations held early in life has a strong negative effect on wages in future occupations. Skill mismatch also significantly increases the probability of an occupational switch and predicts its direction in the skill space. These results provide fresh evidence on the importance of skill mismatch for the job search process.
关键词: Mincer regression, ASVAB, Match quality, Skill mismatch, O*NET, and Occupational switching 学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J31 - Wage Level and Structure; Wage Differentials, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity