Career Progression and Comparative Advantage

This paper constructs and structurally estimates a dynamic occupational choice model that has two distinct features. First, an occupation is vertically and horizontally differentiated by a multidimensional task complexity measure. This allows a simultaneous analysis of career progression and comparative advantage. Second, the model includes hundreds of occupations by characterizing all jobs by a multidimensional task complexity vector, thereby avoiding the curse of dimensionality. Estimation results from the Dictionary of Occupational Titles (DOT) and the National Longitudinal Survey of Youth 1979 (NLSY) indicate that wages increase according to task complexity and that individuals climb up the career ladder along the dimension of tasks in which they have a comparative advantage.Career decisions, dynamic stochastic discrete choice model

Tasks and Heterogeneous Human Capital

This paper proposes a new approach to modeling heterogeneous human capital using task data from the Dictionary of Occupational Titles. The key feature of the model is that it departs from the Roy model, which treats occupations as distinct categories, and conceives of occupations as bundles of tasks. The advantages of this approach are that it can accommodate many occupations without computational burden and provide a clear interpretation as to how and why skills are differently rewarded across occupations. The model is structurally estimated by the Kalman filter using the NLSY79.Roy model, task approach, human capital, occupational choice, Kalman filter, structural estimation.

The Effect of Match Quality and Specific Experience on Career Decisions and Wage Growth

This paper constructs and estimates a career decision model where individuals search for both career matching and employer matching to understand wage growth and career mobility using the NLSY79. It departs from previous papers in that career mobility decisions and participation decisions are explicitly modeled. I find substantial returns to career-specific experience. However, college graduates’ wage grows little through career-match upgrading, which results in a lower incidence of career changes than high school graduates. The finding suggests that college graduates learn about their suitable careers before they enter a labor market.Specific Human Capital, Occupational Choice, Matching

Job Search, Bargaining, and Wage Dynamics

What are the sources of rapid wage growth during a worker's early career? To address this question, I construct and estimate a model of strategic wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and bargaining position. Workers search for alternative job opportunities on the job and accumulate human capital through learning-by-doing. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition improves the outside option value of the worker, which results in wage growth on the job even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the NLSY 79. The parameter estimates are used to simulate counterfactuals. Through these simulations I find that only 60% of the observed wage growth reflects the accumulation of general human capital. The growth match-specific capital through job changes accounts for about 20%. The improved bargaining position explains the remaining 20% of the wage growth. The results suggest that labor market frictions explain a larger part of wage growth than previously considered in the literature.

Career and Skill Formation: A Dynamic Occupational Choice Model with Multidimensional Skills

The goal of the paper is two-folds. First, I construct and estimate a dynamic structural occupational choice model at the three-digit classification level, in which different occupations involve different mix of tasks. Second, I conduct a counterfactual simulation using the estimated model, to quantify the effects of progressive income tax on post-schooling human capital investment and occupational choices. In the model, various skills are acquired through learning-by-doing, depending on the tasks of the experienced occupations. The key feature of the model is that, unlike occupation specific human capital, the acquired skills can be partly transferred to other occupations. Hence, some of low skill occupations can be viewed as “stepping stone” to better occupations. The structural parameters of the model are estimated using the occupational characteristics in the Dictionary of Occupational Titles and the work history in the National Longitudinal Survey of Youth 79. The results of a counterfactual simulation in the estimated model indicate that switching to a flat income tax encourages mobility to highpaying occupations and accelerates human capital accumulation. A drawback of the tax code change is an increased inequality between educational groups.Occupational Choice, Human Capital, Income Tax

Formation of Heterogeneous Skills and Wage Growth

This paper examines how primitive skills associated with occupations are formed and rewarded in the labor market over the careers of men. The objective task complexity measurement from the Dictionary of Occupational Titles enables a more direct look into the primitive skills of workers. I show that the optimal choice of task complexity is a linear function of unobserved skills, worker characteristics, and preference shocks, which implies that the observed task complexity is a noisy signal of underlying skills. Using career histories from the NLSY79, the growth of cognitive and motor skills as well as structural parameters are estimated by the Kalman filter. The results indicate that both cognitive and motor skills account for a considerable amount of cross-sectional wage variation. I also find that cognitive skills grow over careers and are the main source of wage growth; this pattern is particularly pronounced for the highly educated. In contrast, motor skills grow and contribute to wage growth substantially only for high school dropouts.Human Capital; Occupational Choice; Occupational Tasks; Kalman Filter; Structural Estimation

Job Search, Bargaining, and Wage Dynamics

This paper constructs and estimates a model of strategic wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and outside option. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition results in wage growth even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the NLSY79. The results indicate that the improved value of outside option raises wages of ten-year-experienced workers by 16%.

Job Search, Bargaining, and Wage Dynamics

What are the sources of rapid wage growth during a worker’s early career? To address this question, I construct and estimate a model of strategic wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and outside option. Workers search for alternative job opportunities on the job and accumulate human capital through learning-by-doing. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition improves the outside option value of the worker, which results in wage growth on the job even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the NLSY 79. The parameter estimates are used to simulate counterfactuals. The results indicate that the improved value of outside option raises wages of ten-year-experienced workers by 16%, which accounts for about 30% of the wage growth during the first ten years of career. I also find that human capital accumulation affects wage profile not only because it directly changes labor productivity, but also because it alters job search behavior due to low future productivity.Search, Matching, Age-earnings profile, Structural Estimation

Cumulative Effects of Job Characteristics on Health

We present what we believe are the best estimates of how job characteristics of physical demands and environmental conditions affect individual’s health. Five-year cumulative measures of these job characteristics are used to reflect findings in the physiologic literature that cumulative exposure is most relevant for the impact of hazards and stresses on health. Using data from the Panel Study of Income Dynamics we find that individuals who work in jobs with the ‘worst’ conditions experience declines in their health, although this effect varies by demographic group. For example, for non-white men, a one standard deviation increase in cumulative physical demands decreases health by an amount that offsets an increase of two years of schooling or four years of aging. Job characteristics are found more detrimental to the health of females and older workers. These results are robust to inclusion of occupation fixed effects, health early in life and lagged health.Health, occupational characteristic