Using administrative panel data on the entire Danish population we document a new set of facts characterizing occupational mobility. For most occupations, mobility is U-shaped and directional: not only low but also high wage earners within an occupation have a particularly large probability of leaving their occupation, and the low (high) earners tend to switch to new occupations with lower (higher) average wages. Exceptions to this pattern of two-sided selection are occupations with steeply rising (declining) productivity, where mainly the lower (higher) paid workers within this occupation tend to leave. The facts conflict with several existing theories that are used to account for endogeneity in occupational choice, but it is shown analytically that the patterns are explained consistently within a theory of vertical sorting under absolute advantage that includes learning about workers’ abilities.
The U-Shapes of Occupational Mobility
Occupational mobility is highest for high and low earners, and the former move “up” and the latter “down” as in models of vertical re-sorting.
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Journal of Economic Theory, 2010/145, 1354-1385. With Jan Eeckhout. Search affects competing mechanisms: if meetings with low types reduce those of high types, price posting and market separation replace auctions. Go to paper
Journal of Monetary Economics, 2008, Vol. 55, pp. 1054-1066. With M. Galenianos. We characterize price dispersion and welfare in a monetary model with private information: inflation is regressive even though the rich hold more money. Go to paper
Journal of Political Economy, 2017, 124(1), 224-264. With G. Grossman & E. Helpman. (simulations, matlab). We introduce two-sided heterogeneity into a Hecksher-Ohlin-style trade model to study factor reallocation and wage inequality within and across sectors. Go to paper