Seminar: Fane Groes, Copenhagen University.

Title: The U-shapes of Occupational Mobility.

Abstract:

We present a new set of facts that describe the patterns of occupational mobility. We find that the standard theories of mobility are not consistent with these facts. We proceed to propose a new theory. First, we find a strong evidence that the probability of switching occupation is U-shaped in wages such that both people with high and low wages have a probability of switching occupation, which is above average. This pattern in the data is not consistent with the selection mechanism in match-specific sorting models, which would predict that the probability of switching occupation is negatively related to wages. The data further implies that occupational switching is non-random. A worker who is in the upper tail of the wage distribution in some occupation and decides to switch to another occupation, on average moves to an occupation with higher mean earnings. A worker who is in the lower tail of the wage distribution in some occupation and decides to switch to another occupation, on average moves to an occupation with lower mean earnings. Once again, existing models do not generate such patterns. In our theory, workers have different innate abilities. Workers and employers learn about these abilities by observing the output realizations. The speed of learning is independent of the occupation the individual is working in, which allows us to consider more than two occupations without loosing tractability. This turns out to be important to understand the U-shapes in the switching pattern.