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Human capital portfolios

Pedro Silos () and Eric Smith ()

No 2012-03, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor-market dynamics reveal that diversification generates higher income growth for individuals who switch occupations whereas specialization benefits those who stick with one type of job. A human capital portfolio choice problem featuring skills, abilities, and uncertain labor outcomes replicates this general pattern and generate a sizable amount of inequality. Policy experiments illustrate that forced specialization generates lower average income growth and lower turnover, but also lower inequality.

Date: 2012
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-lab
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Journal Article: Human Capital Portfolios (2015) Downloads
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