We find that returns to occupational tenure are substantial. Everything else being constant, 5 years of occupational tenure are associated with an increase in wages of 12% to 20%. Moreover, when occupational experience is taken into account, tenure with an industry or employer has relatively little importance in accounting for the wage one receives. This finding is consistent with human capital being occupation specific.JEL Classification: E24, J24, J31, J44, J62.
We document and analyze the high level and the substantial increase in worker mobility in the United States over the 1968-1997 period at various levels of occupational and industry aggregation. This is important in light of the recent findings in the literature that human capital of workers is largely occupation-or industry-specific. To control for measurement error in occupation and industry coding, we develop a method that utilizes the Retrospective Occupation-Industry Supplemental Data Files, newly released by the Panel Study of Income Dynamics. This allows us to obtain the most reliable estimates of occupational and industry mobility levels available in the literature. We emphasize the importance of these findings for understanding a number of issues such as the changes in wage inequality, aggregate productivity, job stability, and life-cycle earnings profiles.JEL classification: E20, E24, E30, J24, J44, J62.
In this study we argue that wage inequality and occupational mobility are intimately related. We are motivated by our empirical findings that human capital is occupation-specific and that the fraction of workers switching occupations in the United States was as high as 16% a year in the early 1970s and had increased to 19% by the early 1990s. We develop a general equilibrium model with occupation-specific human capital and heterogeneous experience levels within occupations. We argue that the increase in occupational mobility was due to the increase in the variability of productivity shocks to occupations. The model, calibrated to match the increase in occupational mobility, accounts for over 90% of the increase in wage inequality over the period. A distinguishing feature of the theory is that it accounts for changes in within-group wage inequality and the increase in the variability of transitory earnings. JEL Classification: E20, E24, E25, J24, J31, J62.
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