PRODUCTIVITY AND THE LABOR MARKET: COMOVEMENT OVER THE BUSINESS CYCLE*

The productivity‐driven Mortensen–Pissarides model predicts that labor productivity is strongly correlated with labor market variables whereas these correlations were argued to be much weaker in the data, especially since the 1980s. We first document that the size of these discrepancies between the data and the model becomes substantially smaller if employment data from the Current Population Survey is used in measuring productivity instead of the commonly used employment data from the Current Employment Statistics. Second, we show that incorporating time to build and a stochastic value of home production helps reconcile the quantitative performance of the model with the data.     

RISING OCCUPATIONAL AND INDUSTRY MOBILITY IN THE UNITED STATES: 1968–97*

We document and analyze the high level and the substantial increase in worker mobility in the United States over the 1968–97 period at various levels of occupational and industry aggregation. This is important in light of the recent findings that human capital of workers is largely occupation‐ or industry‐specific. To control for measurement error in occupation and industry coding, we develop a method that utilizes the PSID Retrospective Occupation‐Industry Supplemental Data Files. We emphasize the importance of our findings for understanding a number of issues such as the changes in wage inequality, aggregate productivity, job stability, and life‐cycle earnings profiles.     

Occupational mobility and the returns to training

The literature on the returns to training has pointed out that, immediately following a training episode, wages of participants in employer-sponsored training increase substantially while wages of participants in government-sponsored training hardly change. We argue that there is a potential selection issue—most of the government-sponsored trainees are occupation switchers while most participants in employer-sponsored training are occupation stayers. An occupational switch involves a substantial destruction of human capital, and once we account for the associated decline in wages, we find a large positive impact of both employer- and government-sponsored training on workers’ human capital.     

OCCUPATIONAL SPECIFICITY OF HUMAN CAPITAL*

We find that returns to occupational tenure are substantial. Everything else being constant, 5 years of occupational tenure are associated with an increase in wages of 12%–20%. Moreover, when occupational experience is taken into account, tenure with an industry or employer has relatively little importance in accounting for the wage one receives. This finding is consistent with human capital being occupation specific.