A Dynamic Analysis of Educational Attainment, Occupational Choices, and Job Search

This paper examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices. Wage growth occurs in the model because workers move between …rms and occupations as they search for suitable job matches and because workers endogenously accumulate …rm and occupation speci…c human capital. Simulations performed using the estimated model reveal that both self-selection in occupational choices and mobility between …rms account for a much larger share of total earnings and utility than the combined e¤ects of …rm and occupation speci…c human capital. Eliminating the gains from matching between workers and occupations would reduce total wages by 31%, eliminating the gains from job search would reduce wages by 19%, and eliminating the e¤ects of …rm and occupation speci…c human capital on wages would reduce wages by only 2.8%. I would like to thank John Pepper, William Johnson, and especially Steven Stern for their invaluable assistance during this project. I thank three anonymous referees and the editor, Petra Todd, for helpful comments and suggestions. This research has bene…ted from discussions with Loren Smith, John Bound, Timothy Erickson, Randal Verbrugge, and Daniel Mackay, and from the comments of numerous seminar participants. I gratefully acknowledge …nancial support for this research provided by the Bankard Fund for Political Economy at the University of Virginia, the University of Virginia College of Arts and Sciences, and a National Institute on Aging Post Doctoral Fellowship at the University of Michigan (grant number AG00221-14). All views and opinions expressed in this paper are those of the author and do not necessarily represent the views of the Bureau of Labor Statistics. Email: [email protected]. Phone: (202) 691-6593.