Dynamic Skills Acquisition Choice - Jacks of All Trades vs. Dab Hands
This paper proposes a dynamic theory of adjustment of labor force to a shock that makes existing human capital stock obsolete. Workers will not invest in the new, superior skills because their current value depends on the existing complementary stock of human capital, and the obsolete specialized skills are largely incompatible with the new specialized skills. Labor market imperfections make the current distribution of skills a factor in the decision to invest in new skills. This creates room for generalists, workers with an intermediate set of skills who are able to work with both old and new types. Along the equilibrium path the economy accumulates a buffer stock of generalists that eventually makes it profitable to invest in superior specialization. Instead of focusing on steady states, the paper proposes new methods of studying the short-run adjustment in search models with forward-looking investment. It characterizes the dynamics of transition and analyzes how equilibrium paths differ across countries with diverse labor market and educational institutions. The efficiency analysis allows drawing policy implications. Econometric evidence on labor markets in transition economies is shown to be broadly consistent with predictions of the model. East Germany presents a stark example of rapid transition that is difficult to explain by traditional theories but is consistent with the predictions of my model.
Year of publication: |
2000-08-01
|
---|---|
Authors: | Sarychev, Andrei |
Institutions: | Econometric Society |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Banking euro area stress test model
Budnik, Katarzyna, (2020)
-
The growth-at-risk perspective on the system-wide impact of Basel III finalisation in the euro area
Budnik, Katarzyna, (2021)
-
Macroprudential stress test of the euro area banking system
Budnik, Katarzyna, (2019)
- More ...