Date of Award
Doctor of Philosophy (PhD)
Chungsang Tom Lam
This dissertation investigates how young workers’ abilities shape their early careers in the presence of information frictions and labor market shocks through two studies. The research in the first chapter focuses on the strength of a worker’s comparative advantage, which measures the distribution of her abilities. Workers are uncertain about what they are good at when they enter the labor market, and then they shop around to find their best-matched occupations. I use the average distance between productivities in the best-matched occupation and the other occupations to measure the strength of a worker’s comparative advantage. Empirically, those productivities are estimated from a multinomial logit regression of a worker’s choice of her best-matched occupations. A worker with a larger productivity distance has a stronger comparative advantage. The empirical results suggest that this worker spends fewer years shopping occupations and tries fewer occupations before finding her best-matched one. To further quantify the importance of strength in occupational shopping, I build a learning model in which a worker determines her comparative advantage by observing the output at the current occupation. The quantitative model suggests that enlarging the productivity distance by one standard deviation in the model reduces more than 80% of occupational changes in the first ten years of careers. Moreover, for an average labor market entrant, the value of learning about her comparative advantage is 28% of her expected lifetime earning.
The study in the second chapter focuses on how Conscientiousness, a personality trait, helps workers mitigate the adverse effects of graduating during a recession on early career outcomes. By analyzing college graduates who graduated in the 1980s, I find that Conscientiousness reduces the income losses of workers who graduate during a recession. More specifically, those whose Conscientiousness scores are in the upper quartile are sheltered from the losses. The mitigation effect primarily results from workers’ adjustments in their labor supply. Workers high in Conscientiousness tend to work more weeks, try harder to find full-time jobs, and work more hours in these full-time jobs in response to the adverse labor market entry conditions. However, this study does not find any mitigation effects for cognitive ability.
Wang, Guanghua, "Frictions in the Youth Labor Market: Theory and Evidence" (2020). All Dissertations. 2651.