Occupation Growth, Skill Prices, and Wage Inequality

Michael Johannes Böhm (), Hans-Martin von Gaudecker and Felix Schran ()
Additional contact information
Michael Johannes Böhm: TU Dortmund
Felix Schran: AXA AG

No 12647, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies the relationship between changes in occupational employment, occupational wages, and rising overall wage inequality. Using long-running administrative panel data with detailed occupation codes, we first document that in all occupations, entrants and leavers earn lower wages than stayers. This empirical fact suggests substantial skill selection effects that are negative for growing occupations and positive for shrinking ones. We develop and estimate a model for prices paid per unit of skill in occupations, which incorporates occupation-specific skill accumulation over the career and endogenous switching across many occupations. Our results shed light on two important puzzles in prior literature. First, consistent with leading explanations for occupational employment changes, price and employment growth are positively related. Strong counteracting skill changes along the lines of our new empirical fact explain why occupational wages are unrelated to employment growth. Second, skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.

Keywords: multidimensional skill accumulation; administrative panel data; occupational employment and wages; wage inequality; skill prices; selection effects (search for similar items in EconPapers)
JEL-codes: J21 J23 J24 J31 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2019-09
New Economics Papers: this item is included in nep-lma
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Citations: View citations in EconPapers (21)

Published - published in: Journal of Labor Economics, 2024, 42 (1), 201–243

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Related works:
Journal Article: Occupation Growth, Skill Prices, and Wage Inequality (2024)
Working Paper: Occupation Growth, Skill Prices, and Wage Inequality (2022)
Working Paper: Occupation Growth, Skill Prices, and Wage Inequality (2019)
Working Paper: Occupation Growth, Skill Prices, and Wage Inequality (2019)
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