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This paper proposes a new approach to estimate task prices per efficiency unit of skill in the Roy model. I show how the sorting of workers into tasks and their associated wage growth can be used to identify changes in task prices under relatively weak assumptions. The estimation exploits the fact that the returns to observable talents will change differentially over time depending on the changes in prices of those tasks that they predict workers to sort into. In the generalized Roy model, also the average non-pecuniary amenities in each task are identified. I apply this approach to the literature on routine-biased technical change, a key prediction of which is that task prices should polarize. Empirical results for male workers in U.S. data indicate that abstract and manual tasks' relative prices indeed increased during the 1990s and 2000s. as well as participants at various seminars for very helpful comments.
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Financial sectorwages have increased extraordinarily over the last decades.We address two potential explanations for this increase: (1) rising demand for talent and (2) firms sharing rents with their employees. Matching administrative data of Swedish workers, which include unique measures of individual talent, with financial information on their employers, we find no evidence that talent in finance improved, neither on average nor at the top. The increase in relative finance wages is present across talent and education levels, which together can explain at most 20% of it. In contrast, rising financial sector profits that are shared with employees account for up to half of the relative wage increase. The limited labor supply response may partly be explained by the importance of early-career entry and social connections in finance. Our findings alleviate concerns about “brain drain” into finance but suggest that finance workers have captured rising rents over time.
It is well documented that graduates enter different occupations in recessions than in booms. In our article, we examine the impact of this reallocation for long-term productivity and output in a sector. We develop a model in which talent flows to stable sectors in recessions and to cyclical sectors in booms. We find evidence for the predicted change in productivity caused by the business cycle in a setting where output can be readily measured: economists starting or graduating from their PhD in a recession are significantly more productive over the long term than economists starting or graduating in a boom.
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