Essays on Life Cycle Skill Growth and Wage Dynamics: Understanding the Impact of Skill Levels, Personality Traits, and Job Search
Abstract
My thesis is divided into three chapters that study various aspects of human capital, job search dynamics, and wage growth over the life cycle.
Chapter 2 examines how personality traits impact the wages of low-educated men throughout their working lives. The empirical findings reveal economically and statistically significant wage gaps associated with personality traits across the life cycle. For example, highly extraverted early-career workers earn, on average, 18 log points more than their highly introverted counterparts, while highly agreeable mid-career workers experience average wages 24 log points lower than highly disagreeable mid-career workers. Motivated by these empirical findings, I estimate a life cycle model that incorporates on-the-job search and bargaining, personality traits, and skill accumulation. The model explores the role of personality trait heterogeneity in generating observed wage gaps throughout the life cycle via the main model mechanisms. Firms differ in skill-match productivity levels, and skills accumulate on the job, whereas personality traits are fixed upon entry into the labour market. Personality traits influence the search and skill channels, impacting job offer probabilities, job separation probabilities, and the law of motion of skill. The model is estimated using indirect inference. The counterfactual exercise results indicate that personality trait heterogeneity within the on-the-job search channel plays the most important role in generating the observed wage gaps.
In Chapter 3, we leverage the Longitudinal and International Study of Adults (LISA) to exploit now standard measures of job tasks or skills, an innovative measure of overall skill growth at the individual level, and PIAAC test scores. We exploit this unique combination of measures to determine a human capital empirical specification that extends beyond those commonly used. We examine the contribution of the skill measures in LISA, to human capital explanations of both wage level and wage growth variation across individuals in the LISA panel. Relative to a standard human capital empirical specification that includes only education and job experience measures, the extended specifications result in substantial improvement in explanatory power for both log wage level and wage growth equations.
Chapter 4 examines the relationship between skill-increasing activities, self-reported skill changes, and wage growth. Using data from LISA, which features direct measures of skill accumulation and various skill-increasing activities, the study explores how these measures align with human capital theory predictions. Findings reveal the summary skill change measure exhibits the age and educational skill accumulation patterns that were previously theorized by Becker (1964) and Ben-Porath (1967). Further, both the quantity and types of skill-increasing activities are significant predictors of wage growth within experience and education levels. The quantity of activities positively impacts wage growth, especially for low and mid-education groups. Additionally, different types of skill-increasing activities yield varying returns, with independent activities benefiting low educated workers, and formal training and group-oriented activities benefiting mid and high education workers. This research demonstrates that these low-cost and easy-to-administer skill measures can effectively contribute to the understanding of the relationship between skill formation, the returns to different skills or skill investments, and wages over the life cycle.