Job specialization and labor market turnover

Description

I investigate the decline in labor market turnover over recent decades, with particular emphasis on the reduction in job-finding and separation rates. The study examines the role of increased job specialization in accounting for this decline. Using individual-level data from the National Longitudinal Survey of Youth 1979 (NLSY79), combined with skill measures from the Armed Services Vocational Aptitude Battery (ASVAB) and occupational data from O*NET, I estimate a standard Mincerian wage regression augmented with an empirical measure of skill mismatch. The findings indicate that jobs are, on average, highly specialized, and that the degree of specialization has increased by approximately 15 percentage points since 1995. To quantify the impact of rising job specialization on labor market turnover, I develop an equilibrium search-and-matching model incorporating two-sided ex ante heterogeneity, where workers differ in skill endowments and jobs vary in skill requirements. In this framework, job specialization captures the effect of skill mismatch on match productivity. The model shows that as jobs become more specialized, it can explain over 50 percent of the observed decline in labor market turnover. As specialization increases, well-matched workers and firms are more likely to remain in their matches for longer durations. This leads to a higher proportion of well-matched worker–firm pairs, which in turn contributes to the overall decline in labor market turnover.

Publication Date

1-1-2018

Keywords

Turnover, Specialization, Mismatch, Sorting

Conference

20th June, Econometric Society, USA

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