Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262329 
Year of Publication: 
2022
Series/Report no.: 
ECONtribute Discussion Paper No. 167
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
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.
Subjects: 
Skill Prices
Selection Effects
Multidimensional Skill Accumulation
Occupational Employment and Wages
Administrative Panel Data
Wage Inequality
JEL: 
J21
J23
J24
J31
Document Type: 
Working Paper

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