Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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A Directed Search Model of Occupational Mobility

Hui Xiong*

Last modified: %2012-%07-%10


There has been considerable interest in the patterns of occupational mobility and their eff ect on various economic issues. In this paper, I utilize the unique interview structure of the longitudinal SIPP to uncover additional interesting facts on occupational mobility. I fi nd that occupational behavior exhibits strong persistence not only among employed workers but also among non-employed workers; occupational switchers do not always switch to an occupation similar to their previous one; and the average length of transition duration workers spend before taking a new stable job varies with their previous occupation. Motivated by these facts I build a directed search model of occupational mobility, which includes both aggregate and idiosyncratic shocks, and features occupational human capital as well as search frictions. The model can account for the bulk (around 70%) of the patterns in the data and can match reasonably well the emphasized facts. The model is used to study (i) the importance of idiosyncratic vs. aggregate shocks, and (ii) the barriers to occupational mobility. I fi nd that idiosyncratic shocks are the main determinant of occupational mobility whereas aggregate shocks are unimportant. Further, fixed mobility costs and search frictions constitute significant barriers to mobility while the transfer loss of occupational human capital is only of modest importance quantitatively.

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