Occupation Growth, Skill Prices, and Wage Inequality

Arbeitspapier

This paper studies the relationship between changes in occupational employment, occupational wages, and rising overall wage inequality. Using long-running administrative panel data with detailed occupation codes, we first document that in all occupations, entrants and leavers earn lower wages than stayers. This empirical fact suggests substantial skill selection effects that are negative for growing occupations and positive for shrinking ones. We develop and estimate a model for prices paid per unit of skill in occupations, which incorporates occupation-specific skill accumulation over the career and endogenous switching across many occupations. Our results shed light on two important puzzles in prior literature. First, consistent with leading explanations for occupational employment changes, price and employment growth are positively related. Strong counteracting skill changes along the lines of our new empirical fact explain why occupational wages are unrelated to employment growth. Second, skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 12647

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 Johannes ; von Gaudecker, Hans-Martin ; Schran, Felix
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207472