Iourii Manovskii
Assistant Professor of Economics at the University of Pennsylvania

Published Papers:

Joint with Gueorgui Kambourov, University of Toronto

Review of Economic Studies, 76 (2) April 2009, pp. 731-759.

[Extended (but somewhat different) working paper version available here] 

 

In this paper we argue that wage inequality and occupational mobility are intimately related. We are motivated by our empirical findings that human capital is occupation-specific and that the fraction of workers switching occupations in the United States was as high as 16% a year in the early 1970s and had increased to 21% by the mid 1990s. We develop a general equilibrium model with occupation-specific human capital and heterogeneous experience levels within occupations. We find that the model, calibrated to match the level of occupational mobility in the 1970s, accounts quite well for the level of (within-group) wage inequality in that period. Next, we find that the model, calibrated to match the increase in occupational mobility, accounts for over 90% of the increase in wage inequality between the 1970s and the 1990s. The theory is also quantitatively consistent with the level and increase in the short-term variability of earnings.

Joint with Gueorgui Kambourov, University of Toronto

International Economic Review, 50 (1) February 2009, pp. 63-115.

 

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% to 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.

Joint with Marcus Hagedorn, University of Zurich

American Economic Review, 98(4), September 2008, pp. 1692-1706.

[Extended working paper version available here] 

 

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters –- the value of non-market activity and the bargaining weights. Our calibration implies that the model is consistent with the data.

Joint with Gueorgui Kambourov, University of Toronto

International Economic Review, 49 (1) February 2008, pp. 41-79.

 

We document and analyze the high level and the substantial increase in worker mobility in the United States over the 1968-1997 period at various levels of occupational and industry aggregation. This is important in light of the recent findings in the literature 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 Retrospective Occupation-Industry Supplemental Data Files, newly released by the Panel Study of Income Dynamics. This allows us to obtain the most reliable estimates of occupational and industry mobility levels available in the literature. We emphasize the importance of these findings for understanding a number of issues such as the changes in wage inequality, aggregate productivity, job stability, and life-cycle earnings profiles.

Joint with Gueorgui Kambourov, U. of Toronto and Irina Telyukova, U. of California San Diego

In Frontiers in Family Economics, Volume 1, edited by Peter Rupert, pp. 217-256, 2008. Emerald Group Publishing Limited, UK.

 

We study trends in occupational and geographic mobility of single and married men and women in the United States over the last 40 years. We find that while occupational mobility has increased for almost all subgroups of males, most of the increase was accounted for by a sharp increase in the mobility of singles. Similarly, the rates of geographic mobility were virtually identical for single and married workers in the early 1970s, but diverged since then – the increase in the geographic mobility of single men was more pronounced than the increase for married men. We discuss several theories of worker mobility in light of these trends and suggest that the increased labor force attachment of women might have played a prominent role in driving these changes.

 

Research Papers:

August 2008

Joint with Hyeok Jeong, Vanderbilt University and Yong Kim, University of Southern California

 

We propose and estimate a model in which changes in the demographic composition of the labor force may affect the returns to labor market experience. We consider workers as providing two distinct productive services - physical effort, or ``labor,'' and services of the skill accumulated with labor market experience, or ``experience.'' The key element in the model is the aggregate production function that allows for complementarity between the appropriately measured aggregate stocks of labor and experience. The parameters of the aggregate technology are identified by estimating individual earnings equations that consistently aggregate. Both time-series and cross-sectional data confirm strong experience-labor complementarity. We find that the observed demographic changes that drive the aggregate experience to labor ratio account nearly perfectly for the substantial changes in experience premium over time.

April 2009

Joint with Marcus Hagedorn, University of Zurich and Sergiy Stetsenko, University of Pennsylvania

 

We introduce ex-ante heterogeneity between workers and two technology shocks, neutral and investment-specific, as the driving forces into the basic Mortensen-Pissarides search and matching model. The calibrated model is simultaneously consistent with a strong response of labor market variables to cyclical fluctuations in productivity and a relatively weak response to various policy changes (e.g., taxes) found in cross-country data. The model also matches the evidence that countries with higher tax rates have higher aggregate productivity, lower skill premia, and higher unemployment rates among both high- and low-skilled workers. The key mechanism that allows us to achieve these results is that aggregate and group-specific productivities in our model are endogenous and respond to changes in policy.

August 2009

Joint with Marcus Hagedorn, University of Zurich

 

We consider a model with on-the-job search where current wages depend only on current aggregate labor market conditions and match-specific idiosyncratic productivities. We nevertheless show that the model replicates findings which have been interpreted as evidence against a spot wage model. Past aggregate labor market conditions such as the unemployment rate at the start of the job, the lowest unemployment rate since the start of a job, or the number of outside job offers received since the start of the job have explanatory power for current wages since these variables are correlated with procyclical match qualities. The business-cycle volatility of wages is higher for newly hired workers than for job stayers since workers can sample from a larger pool of job offers in a boom than in a recession. Using NLSY and PSID data, we find that the existing evidence against a spot wage model is rejected once we control for match-specific productivity as implied by our theory.

August 2009

Joint with Marcus Hagedorn, University of Zurich

 

We consider several shortcomings of the Mortensen-Pissarides model emphasized in the literature. The productivity-driven model predicts that labor productivity, defined as the ratio of output to employment, is strongly correlated with unemployment, vacancies and wages whereas these correlations are much weaker in the data. 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.

June 2005

Joint with Gueorgui Kambourov, University of Toronto

 

We document a significant flattening of life-cycle earnings profiles for the successive cohorts of male workers entering the labor market since the late 1960s. Further, we provide evidence on the steepening in the profiles of earnings inequality and an upward shift in the profiles of occupational mobility for more recent cohorts. We develop a theory that relates these developments and study quantitatively what fraction of the change in the life-cycle profiles of earnings and earnings inequality is accounted for by the economic forces that drive the increase in occupational mobility. Preliminary results indicate that the increase in the variability of productivity shocks to occupations coupled with the increase in the rate of idiosyncratic destruction of occupational matches from the 1960s to the 1990s, may account for all these observations. The theory we propose is consistent with other facts characterizing the changes in the labor market, such as a sharp increase in cross-sectional wage inequality and the increase in the transitory variability of earnings.

March 2006

Joint with Gueorgui Kambourov, University of Toronto and Miana Plesca, University of Guelph

 

The rapidly growing literature studying the returns to firm and government provided training has made a striking observation. Returns to firm-sponsored training are positive and large while returns to government-sponsored training are low or even negative. This has sparked a lot of research interest in studying why government-sponsored training is so inefficient. Policymakers are worried whether firms provide a sufficient amount of training given that firm-sponsored training is so beneficial and the government has little direct control over it. In this paper we re-evaluate the motivating evidence. We show that there is a clear selection issue overlooked by the existing literature. In particular, a large fraction of the participants in government sponsored training are occupation switchers, while most of the participants in firm-sponsored training are occupation stayers. Since a switch of an occupation involves a substantial destruction of human capital, the associated decline in wages needs to be accounted for. Once we do this, the returns to firm and government sponsored training look quite similar.

November 2002

 

I show that, in the absence of complete insurance markets, progressive taxation of labor income may provide productivity and welfare gains as compared to a revenue-equivalent proportional tax. In order to increase income in the future, individuals have to forgo income today by accepting lower wages while accumulating human capital or when destroying specific human capital in order to build it elsewhere. I first show analytically that a progressive tax system encourages people to make these temporary sacrifices despite the increased tax burden when wages are high. Next, I measure the quantitative importance of this channel in a calibrated general equilibrium model.

April 2009

Joint with Gueorgui Kambourov, University of Toronto

 

The monthly Current Population Survey (CPS) and its Annual Demographic March supplement are the leading sources of data on worker reallocation across occupations, industries, and firms. Much of the active current research is based on these data. In this paper we contrast the (March) CPS with the Retrospective Occupation-Industry Supplemental Data Files from the Panel Study of Income Dynamics, as sources of data for measuring the dynamics of worker mobility. We find that (March) CPS data is characterized by a substantial amount of noise when it comes to identifying occupational and industry switches. Next, we argue that March CPS data provides a poor measure of annual occupational mobility. Instead, it likely measures mobility only over a much shorter period. Finally, we show that the (changes in) the procedure to impute missing data have a dramatic effect on the interpretation of the CPS data in, e.g., the trend in occupational mobility.



Work in Progress:

The U-Shapes of Occupational Mobility (with Philipp Kircher and Fane Naja Groes)

Fragility: A Quantitative Analysis of the US Health Insurance System (with Bjoern Bruegemann)

Partnerships (with Elena Krasnokutskaya and Ludwig Ressner)

Pyramids (with Guillaume Vandenbroucke)

The Cyclical Behavior of Worker Reallocation (with Marcus Hagedorn and Gueorgui Kambourov)

Worker Mobility in the United States and Germany: A Primer (with Marcus Hagedorn and Gueorgui Kambourov)

Transitional Dynamics of Transitional Economies: Why are they so Different? (with Irina Telyukova)

 

Temporarily Abandoned Projects:

Ends vs. Means: Consequentialism in Social Choice Theory (with Veeresh Narain)

General Relativity and the Heterogeneity of Saving Rates

Finance and Growth in the Long Run: Schumpeter Might Be Wrong?

 

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