Occupational Choice and Returns to Skills in the United States: Evidence from the NLSY79 and O*NET
Juan Chaparro, University of Minnesota
Occupational choices carry substantial information about a worker's human capital. They are informative about a worker's education, experience and skills. Workers, however, self-select into occupations. Therefore, occupational indicators are endogenous variables in any wage equation. This paper defines an occupation as a vector in a space of skill requirements, and proposes an instrumental variables approach to deal with endogeneity. I combine data from the National Longitudinal Survey of Youth, 1979 Cohort (NLSY79), with data from the Occupational Information Network (O*NET), a publicly available database sponsored by the U.S. Department of Labor. By doing so, I instrument the math requirements of a worker's occupation in 2010 with the math requirements of the worker's preferred occupation back in 1979. A similar instrument is used for language requirements. Such procedure allows me to measure the wage return to math and language skills for individuals represented by the NLSY79 sample.
Presented in Session P8. Economy, Labor Force, Education, and Inequality/Gender, Race and Ethnicity