Occupational Mobility and Wage Inequality

Gueorgui Kambourov and Iourii Manovskii

No 1189, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 heterogeneous 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: within-group inequality; wage inequality; occupational mobility; human capital; sectoral reallocation (search for similar items in EconPapers)
JEL-codes: E20 E24 E25 J24 J31 J62 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2004-06
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (39)

Published - published in: Review of Economic Studies, 2009, 76 (2), 731-759

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Journal Article: Occupational Mobility and Wage Inequality (2009)
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