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, University of Toronto

Macroeconomic Dynamics, Forthcoming.

 

The monthly Current Population Survey (CPS), with its Annual Demographic March supplement, and the Panel Study of Income Dynamics (PSID) 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 these datasets as sources of data for measuring the dynamics of worker mobility. We find that (i) (March) CPS data is characterized by a substantial amount of noise when it comes to identifying occupational and industry switches; (ii) March CPS data provides a poor measure of annual occupational mobility and, instead, most likely measures mobility over a much shorter period; (iii) (the changes in) the procedure to impute missing data has a dramatic effect on the interpretation of the CPS data in, e.g., the trend in occupational mobility. The most important shortcomings of the PSID are the facts that (i) occupational and industry affiliation data is available in most years at an annual frequency; (ii) the PSID's sample, by design, excludes immigrants arriving to the U.S. after 1968; (iii) the Retrospective Occupation-Industry Files with reliable occupation and industry affiliation data are available only until 1980.

Joint with Marcus Hagedorn, University of Zurich

International Economic Review, Forthcoming.

 

The productivity-driven Mortensen-Pissarides model predicts that labor productivity, defined as the ratio of output to employment, is strongly correlated with employment, unemployment, vacancies and wages whereas these correlations were argued to be much weaker in the data, especially since the mid 1980s. 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 with stochastic productivity being the key determinant of the business cycle dynamics of the model.

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 2010

Joint with Marcus Hagedorn, University of Zurich

R&R, American Economic Review

 

We consider a model with on-the-job search where current wages depend only on current aggregate labor market conditions and idiosyncratic match-specific productivities. We show theoretically that the model replicates findings typically interpreted as evidence that wages are history dependent and inconsistent with a model where wages depend on current conditions only. We develop a method to measure match qualities in the data and show empirically that various variables summarizing past aggregate labor market conditions have explanatory power for current wages only because they are correlated with match qualities. They lose any predictive power once match qualities are accounted for.

August 2010

Joint with Fane Groes, Copenhagen Business School and Philipp Kircher, University of Pennsylvania

 

Using administrative panel data on the entire Danish population we document a new set of facts characterizing occupational mobility. For most occupations, mobility is U-shaped and directional: both low and high wage earners within an occupation have a particularly large probability of leaving this occupation, and the low (high) earners tend to switch to new occupations with lower (higher) average wages. Exceptions are occupations with steeply rising (declining) productivity, where mainly the lower (higher) paid workers within this occupation tend to leave. The facts conflict with several existing theories that are used to account for endogeneity in occupational choice, but it is shown analytically that the patterns are explained consistently within a theory of sorting under absolute advantage that includes learning about workers' abilities.

September 2010

Joint with Bjoern Bruegemann, Yale University

 

The US health insurance system for those younger than 65 is and will remain largely employer-based after the implementation of the 2010 reform. We develop an equilibrium model of the existing system and study quantitatively the likely effects of the enacted legislation. We show that to match the key empirical regularities of the existing system it is essential to model workers as being discrete, match the firm size distribution and the extent of search frictions, and to model explicitly government regulations affecting the system, such as tax-advantaged treatment of employer purchased coverage and legal non-discrimination restrictions. The model predicts that the enacted reform will achieve universal coverage. The premium regulations of the reform alone would induce a collapse of coverage due to adverse selection. But the accompanying tax credits for small businesses and penalties for individuals are sufficient to prevent this collapse.

September 2010

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

R&R, American Economic Review

 

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 2010

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 2010

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

 

A large literature studying the returns to firm- and government-sponsored training has made a striking observation. Immediately following a training episode, wages of participants in firm-sponsored training rise substantially while wages of participants in government-sponsored training rise little, or even decline. This has sparked considerable research interest in studying why government-sponsored training is so ineffective. In this paper 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 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, we find a large positive impact of training on workers' human capital. The magnitude of this effect is similar for firm- and the government-sponsored training. Depending on how strong the effect of training on occupational mobility is, our analysis provides bounds on the returns to training with the standard estimators of the returns to government-sponsored training corresponding to the lower bound.

October 2010 (New Version!)

Joint with Marcus Hagedorn, University of Zurich

 

We propose a way to measure the contribution of search frictions to the level of wage dispersion observed in the data. Using the data from the 1979 cohort of the National Longitudinal Survey of Youth we find that the variance of match qualities between workers and employers accounts for about 6% of the variance of log wages. Our method relies on a minimal set of assumptions, the main among them being that match quality is constant over the duration of a job. We show that this assumption can be verified empirically and is supported by the data.

October 2009

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. The results indicate that the increase in the variability of productivity shocks to occupations from the early 1970s to the late 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.

September 2010 (New Version! Slides posted, paper will be available soon.)

Joint with Luigi Bocola, University of Pennsylvania and Marcus Hagedorn, University of Zurich

 

We show that presence of worker heterogeneity invalidates the key identification assumption in structural VARs with long run restrictions and biases identification of technology shocks using (misspecified) aggregate production function accounting. We show that an RBC model with heterogeneous labor is quantitatively consistent with unconditional and conditional moments of key macroeconomic time series. We use the model to quantify the size of the bias in identified technology shocks using the approaches in the literature and find it to be large.


Data Project: Postwar U.S. Labor Productivity Data

Joint with Bjoern Bruegemann, Yale University and Marcus Hagedorn, University of Zurich

Latest Update: October 3, 2010 (Extended unpublished BLS LPC aggregate productivity series to Q2 2010)

 

Research on U.S. labor productivity is complicated by the fact that a variety of measures is in use, which differ along several dimensions. The objective of this project is to construct and make available a dataset that contains most relevant series to provide a common ground for the discussion.

 

Data

Data Description

 

 

Work in Progress:

Excessive Risk Taking (with Marcus Hagedorn)

Employer Coverage Decisions: Unintended Consequences of 2010 Health Insurance Reform (with Bjoern Bruegemann and Gregory Phelan)

Plugging Holes (with Philipp Kircher)

Interpreting Income Dynamics (with Moira Daly, Fane Groes, and Dmytro Hryshko)

Reconciling Estimates of Income Processes in Growth and Levels (with Dmytro Hryshko)

Partnerships (with Elena Krasnokutskaya and Ludwig Ressner)

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:

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.

 

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