Occupation growth, skill prices, and wage inequality

Arbeitspapier

This paper studies the relationship between occupational employment, occupational wages, and rising wage inequality. We document that in all occupations, entrants and leavers earn less than stayers. This suggests selection effects that are negative for growing occupations and positive for shrinking ones. We estimate a model of occupational prices and skills, which includes occupation-specific skill accumulation and endogenous switching across many occupations. Consistent with leading explanations for occupational changes, estimated prices (i.e., selection-corrected wages) and occupational employment growth are positively related. Just over 40% of selection is due to age in the sense that marginal workers have had less time to accumulate skills. The remainder is due to Roy-type selection, i.e., workers reacting to changing prices and shocks unrelated to age. Skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECONtribute Discussion Paper ; No. 167

Classification and Topics

• Classification: Wirtschaft ; Labor Force and Employment, Size, and Structure ; Labor Demand ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wage Level and Structure; Wage Differentials
• Subject: Skill Prices ; Selection Effects ; Multidimensional Skill Accumulation ; Occupational Employment and Wages ; Administrative Panel Data ; Wage Inequality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Böhm, Michael ; von Gaudecker, Hans-Martin ; Schran, Felix
• Event: Veröffentlichung
• (who): University of Bonn and University of Cologne, Reinhard Selten Institute (RSI)
• (where): Bonn and Cologne
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/262329
• Last update: 10.03.2025, 11:43 AM CET