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Title: Occupational Choice and Returns to Skills: evidence from the NLSY79 and O*Net

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: The goal of this paper is to measure and decompose the wage return to a set of human skills, taking into account the self-selection of workers into their occupations. The paper combines data from the National Longitudinal Survey of Youth, 1979 Cohort (NLSY79), with data from the Occupational Information Network (O*Net) and proposes an instrumental variables approach to estimate the wage return to math and language skills. To deal with the endogeneity of occupations, I instrument the importance of math for a worker's occupation in her thirties and forties (occupational choices) with the importance of math for the worker's preferred occupation back in her early twenties (occupational aspirations). A similar instrument is proposed for language skills. The total wage return to math and language skills is then decomposed between direct returns and occupational sorting effects. The paper finds that most of the wage return to language skills between 1992 and 2012 was due to occupational sorting. Math skills have a larger return than language skills and occupational sorting explained only 45% of the total wage return to math skills in 2012. The remaining 55% corresponds to direct returns, which are realized across all occupations.

Url: https://sole-jole.org/16300.pdf

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Authors: Chaparro, Juan

Publisher: University of Minnesota

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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