Working papers
Understanding the Decline in Occupational Mobility [Paper] [Appendix]
The process of workers switching from occupation to occupation is a vital part of career development and self-discovery. Using the CPS and SIPP, I show that occupational switching rates have declined significantly over the past 25 years. This decline has been robust for each consecutive cohort and is more pronounced for younger workers than older workers. The decline could imply that it is becoming more difficult and costly for workers to find better jobs (due to increases in switching costs), leaving people increasingly stuck in poorly matched and unfulfilling careers. Paradoxically, it could also mean that finding better jobs is becoming easier (thanks to advances in ICT), since workers with good job matches are less likely to switch. This paper develops a dynamic discrete choice life-cycle model to separately identify and quantify how changes in switching costs and information over time contribute to the observed declines in occupation switching. The result is that increased switching costs drive about 72% of the decline, while better information drives about 8%. The increases in switching costs have led to less productive occupational matches for workers and thus significant welfare losses. On average, workers have lost 3% of their total lifetime income from increases in switching costs over this period.
Trade, Occupation Sorting, and Inequality
with Mons Chan
Firms react to changes in factor prices with intensive and extensive-margin employment adjustments at the occupational-level. We study the distributional and aggregate consequences of this make-or-buy dynamic by developing a novel network model of heterogeneous firm-to-firm trade where the boundary of each firm depends on factor prices and firm-occupation comparative advantage in input-production. We show that the model can be easily aggregated and taken to industry-level data, and use the calibrated model to examine recent trends in employment, wages and trade in the USA. We use public OES and CPS data to show empirical evidence that a significant fraction of the growth in wage inequality in the USA is due to changes in firm/industry specialization and occupation sorting. To understand and measure the underlying causes of these trends, we calibrate the model to occupation and industry data from the OES and input-output tables. The results suggest that 1/3rd of the increases in wage inequality stem from decreases in inter-industry trade frictions with the remaining 2/3rds stemming from changes in technology and labor supply. Falling trade frictions are also responsible for all of the increases in occupational sorting and concentration. Had trade frictions been held at their 2002 level, productivity growth would have led to an increase in vertical integration, rather than the decrease observed in the data.
Student Loans and Early Employment Outcomes
In this paper I investigate the link between student debt and post-graduation job market outcomes. Using a combination of survey and administrative data on graduates in two cohorts, I show that there is a significant negative correlation between the amount of debt upon graduation and the probability of finding a job which matches your education. I use evidence from Equifax to motivate a model of job search and long-term debt where the cost of consumer credit depends on your student loan balance. I successfully calibrate the model to the data and show that this debt constraint mainly binds for high and medium human capital graduates, as it affects the amount of time they are able to spend searching for a good job. I then show that alternative repayment and interest rate policies would have improved labor market outcomes for graduates in 07/08 by allowing extended search times, increasing match quality and possibly lifetime productivity.
Occupational Licensing and Labor Market Fluidity
with Morris Kleiner
This paper investigates the relationship between occupational licensing and labor market outcomes using both public individual survey data from the Current Population Survey (CPS) and the Survey of Income and Program Participation (SIPP), as well as a unique newly constructed data set on licensing requirements. We show that occupational licensing requirements/costs have increased significantly for most occupations over time. Using propensity score matching, we compare the occupational switching patterns and wage changes for those in licensed vs. unlicensed occupations. The preliminary findings show that occupational licensure has significant negative effects on occupational mobility, both for switching in to and out of licensed occupations. After controlling for observable heterogeneity, including occupational skills, workers switching into a licensed occupation experience higher wage gains. We also find that licensing presents less of a barrier to entry for the unemployed relative to employed workers, possibly due to differences in the opportunity cost of time between the two groups.
Works in Progress
Heterogeneous Passthrough from TFP to Wages
with Mons Chan and Sergio Salgado
In this paper, we use matched employer-employee data from Denmark to study the extent to which firms’ productivity shocks are passed to workers’ wage growth. We make four major contributions. First, we study the effects of firm-level shocks separately for job stayers, movers, and those transitioning in and out of unemployment. Second, we address and correct for selection bias originating from both workers and firms. Third, we investigate the effect of shocks separately for both annual wages and hourly wages. Fourth, we study how passthrough varies across different workers, different firms, and over the business cycle. Our preliminary results show a much larger degree of passthrough from firms’ shocks to workers’ wages than reported in previous work. On average, a one standard deviation TFP change generates a 6.6 pp change in annual wages ($ 3801 USD for average workers). Selection plays a crucial role in our results. In fact, when selection is ignored, passthrough is largely underestimated and falls in line with the estimates found in other studies. Furthermore, we find that the effect of productivity shocks on wage growth for workers that transition across firms is of the same order of magnitude relative to workers that stay in the same firm. Finally, we find large differences in the passthrough of productivity shocks to wages for workers of different income levels, across firms in different industries, and between periods of expansion and recession.
Frictions in the College Application Portfolio Decision
with Emily Moschini
The colleges which high school students apply to determine their potential choice set for college enrollment. In this project, we examine the college application portfolio decision. Using data from the U.S. Department of Education, we first assess the relationship between heterogeneous college characteristics and high school students application portfolio with a simple empirical analysis (affirming work by Hoxby (2012) and Schoelmann et al. (2018)). We then apply matching techniques developed by Fox (2018) and Agarwal (2015) in a many-to-one matching market using observed matches to study how the characteristics of college and students jointly determine the match value and the match patterns. Finally, we build a search model of the college application process and quantify the relative magnitudes of the potential frictions that generate portfolio differences and matching outcomes, aggregating them into two general categories: information frictions and geographic frictions. Information frictions are determined by the average skill of the workers and other students at the student's location; geographic frictions are determined by the distance from their location to the schools that match their skill level. We run counterfactual experiments and show what effect policies aimed at mitigating each friction would have on the matching equilibrium and welfare.
Understanding the Decline in Occupational Mobility [Paper] [Appendix]
The process of workers switching from occupation to occupation is a vital part of career development and self-discovery. Using the CPS and SIPP, I show that occupational switching rates have declined significantly over the past 25 years. This decline has been robust for each consecutive cohort and is more pronounced for younger workers than older workers. The decline could imply that it is becoming more difficult and costly for workers to find better jobs (due to increases in switching costs), leaving people increasingly stuck in poorly matched and unfulfilling careers. Paradoxically, it could also mean that finding better jobs is becoming easier (thanks to advances in ICT), since workers with good job matches are less likely to switch. This paper develops a dynamic discrete choice life-cycle model to separately identify and quantify how changes in switching costs and information over time contribute to the observed declines in occupation switching. The result is that increased switching costs drive about 72% of the decline, while better information drives about 8%. The increases in switching costs have led to less productive occupational matches for workers and thus significant welfare losses. On average, workers have lost 3% of their total lifetime income from increases in switching costs over this period.
Trade, Occupation Sorting, and Inequality
with Mons Chan
Firms react to changes in factor prices with intensive and extensive-margin employment adjustments at the occupational-level. We study the distributional and aggregate consequences of this make-or-buy dynamic by developing a novel network model of heterogeneous firm-to-firm trade where the boundary of each firm depends on factor prices and firm-occupation comparative advantage in input-production. We show that the model can be easily aggregated and taken to industry-level data, and use the calibrated model to examine recent trends in employment, wages and trade in the USA. We use public OES and CPS data to show empirical evidence that a significant fraction of the growth in wage inequality in the USA is due to changes in firm/industry specialization and occupation sorting. To understand and measure the underlying causes of these trends, we calibrate the model to occupation and industry data from the OES and input-output tables. The results suggest that 1/3rd of the increases in wage inequality stem from decreases in inter-industry trade frictions with the remaining 2/3rds stemming from changes in technology and labor supply. Falling trade frictions are also responsible for all of the increases in occupational sorting and concentration. Had trade frictions been held at their 2002 level, productivity growth would have led to an increase in vertical integration, rather than the decrease observed in the data.
Student Loans and Early Employment Outcomes
In this paper I investigate the link between student debt and post-graduation job market outcomes. Using a combination of survey and administrative data on graduates in two cohorts, I show that there is a significant negative correlation between the amount of debt upon graduation and the probability of finding a job which matches your education. I use evidence from Equifax to motivate a model of job search and long-term debt where the cost of consumer credit depends on your student loan balance. I successfully calibrate the model to the data and show that this debt constraint mainly binds for high and medium human capital graduates, as it affects the amount of time they are able to spend searching for a good job. I then show that alternative repayment and interest rate policies would have improved labor market outcomes for graduates in 07/08 by allowing extended search times, increasing match quality and possibly lifetime productivity.
Occupational Licensing and Labor Market Fluidity
with Morris Kleiner
This paper investigates the relationship between occupational licensing and labor market outcomes using both public individual survey data from the Current Population Survey (CPS) and the Survey of Income and Program Participation (SIPP), as well as a unique newly constructed data set on licensing requirements. We show that occupational licensing requirements/costs have increased significantly for most occupations over time. Using propensity score matching, we compare the occupational switching patterns and wage changes for those in licensed vs. unlicensed occupations. The preliminary findings show that occupational licensure has significant negative effects on occupational mobility, both for switching in to and out of licensed occupations. After controlling for observable heterogeneity, including occupational skills, workers switching into a licensed occupation experience higher wage gains. We also find that licensing presents less of a barrier to entry for the unemployed relative to employed workers, possibly due to differences in the opportunity cost of time between the two groups.
Works in Progress
Heterogeneous Passthrough from TFP to Wages
with Mons Chan and Sergio Salgado
In this paper, we use matched employer-employee data from Denmark to study the extent to which firms’ productivity shocks are passed to workers’ wage growth. We make four major contributions. First, we study the effects of firm-level shocks separately for job stayers, movers, and those transitioning in and out of unemployment. Second, we address and correct for selection bias originating from both workers and firms. Third, we investigate the effect of shocks separately for both annual wages and hourly wages. Fourth, we study how passthrough varies across different workers, different firms, and over the business cycle. Our preliminary results show a much larger degree of passthrough from firms’ shocks to workers’ wages than reported in previous work. On average, a one standard deviation TFP change generates a 6.6 pp change in annual wages ($ 3801 USD for average workers). Selection plays a crucial role in our results. In fact, when selection is ignored, passthrough is largely underestimated and falls in line with the estimates found in other studies. Furthermore, we find that the effect of productivity shocks on wage growth for workers that transition across firms is of the same order of magnitude relative to workers that stay in the same firm. Finally, we find large differences in the passthrough of productivity shocks to wages for workers of different income levels, across firms in different industries, and between periods of expansion and recession.
Frictions in the College Application Portfolio Decision
with Emily Moschini
The colleges which high school students apply to determine their potential choice set for college enrollment. In this project, we examine the college application portfolio decision. Using data from the U.S. Department of Education, we first assess the relationship between heterogeneous college characteristics and high school students application portfolio with a simple empirical analysis (affirming work by Hoxby (2012) and Schoelmann et al. (2018)). We then apply matching techniques developed by Fox (2018) and Agarwal (2015) in a many-to-one matching market using observed matches to study how the characteristics of college and students jointly determine the match value and the match patterns. Finally, we build a search model of the college application process and quantify the relative magnitudes of the potential frictions that generate portfolio differences and matching outcomes, aggregating them into two general categories: information frictions and geographic frictions. Information frictions are determined by the average skill of the workers and other students at the student's location; geographic frictions are determined by the distance from their location to the schools that match their skill level. We run counterfactual experiments and show what effect policies aimed at mitigating each friction would have on the matching equilibrium and welfare.