Occupational Mobility and Wage Inequality

65 Pages Posted: 14 Jul 2004

See all articles by Gueorgui Kambourov

Gueorgui Kambourov

Arizona State University (ASU) - Economics Department

Iourii Manovskii

University of Pennsylvania - Department of Economics; IZA Institute of Labor Economics

Date Written: June 2004

Abstract

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 eterogeneous 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.

Keywords: occupational mobility, wage inequality, within-group inequality, human capital, sectoral reallocation

JEL Classification: E20, E24, E25, J24, J31, J62

Suggested Citation

Kambourov, Gueorgui and Manovskii, Iourii, Occupational Mobility and Wage Inequality (June 2004). IZA Discussion Paper No. 1189. Available at SSRN: https://ssrn.com/abstract=564563

Gueorgui Kambourov

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

Iourii Manovskii (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6880 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~manovski/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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