Occupational Self-Selection in a Labor Market With Moral Hazard

46 Pages Posted: 27 Mar 2007

See all articles by Berna Demiralp

Berna Demiralp

Old Dominion University - Economics

Date Written: March 2007


This paper presents a model of occupational choice in a labor market characterized by moral hazard. The model demonstrates that in such a labor market, workers' occupational choices are determined by not only their comparative advantage but also their effort decisions in each occupation. The estimation results, based on data from the National Longitudinal Survey of Youth, suggest that workers' self-selection into white collar and blue collar occupations leads to higher wages and lower dismissal rates in both occupations. Furthermore, analysis results reveal that these effects of self-selection diminish as the labor market becomes increasingly characterized by moral hazard.

Keywords: occupational choice, moral hazard, dismissals

JEL Classification: J24, J63

Suggested Citation

Demiralp, Berna, Occupational Self-Selection in a Labor Market With Moral Hazard (March 2007). Available at SSRN: https://ssrn.com/abstract=975014 or http://dx.doi.org/10.2139/ssrn.975014

Berna Demiralp (Contact Author)

Old Dominion University - Economics ( email )

Norfolk, VA 23529
United States

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