| The goal of this dissertation is study the implications of worker learning about their unobserved abilities. More specifically we introduce an equilibrium labor market model, where workers gradually learn about their unobserved production abilities. While engaged in a productive activity (occupation), workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes. As workers acquire more information, they self-select into the occupations in which they expect to perform best, and their wages increase. Our setup can account for the offsetting worker flows across occupations, the within-occupation wage inequality, as well the decline in the probability of occupational switching as workers grow older, that we observe in the data. Using data from the 1996 panel of the SIPP, we estimate the model by partitioning occupations into blue-collar and white-collar. Although the only driving force is learning about one's unobserved abilities, our setup can correctly predict the employment shares of occupations and reproduce the corresponding within-occupation wage distributions. Furthermore, it captures the observed decline in the probability of occupational switching as workers grow older, as well as the occupational choices of young workers. Our estimates favor a setup in which each worker-type is the most productive in his occupation, rather than the hierarchical model of ability in which some workers perform better in all occupations. Even though our estimation procedure does not use any information on wage dynamics, our estimated framework can explain a sizeable part of the increase in wages as workers grow older. Furthermore an increase in the unemployment rate similar to the one experienced by many European countries in the early 1970s is found to reduce the flow of output per employed worker by 1% annually. Finally we use our setup to investigate the changes in employment shares and wage inequality from the early 1980s to the mid 1990s for workers who are relatively young and low educated. Our results indicate that the observed changes are consistent with a technical change in white-collar jobs that increased its employment share, but left overall wage dispersion largely unchanged. |
