Electronic Thesis and Dissertation Repository

Thesis Format

Integrated Article

Degree

Doctor of Philosophy

Program

Economics

Supervisor

Bowlus, Audra J.

2nd Supervisor

Lochner, Lance J.

3rd Supervisor

Robinson, Christopher R.

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.

Summary for Lay Audience

This doctoral dissertation explores various aspects of human capital, job search, and wage growth over the life cycle through three comprehensive chapters.

Chapter 2 explores the influence of personality traits on the wages of low-educated adult men throughout their working lives. It uncovers notable wage gaps associated with different personality traits throughout the life cycle. For instance, on average, extraverted early-career workers tend to earn significantly more than their introverted counterparts, while highly agreeable mid-career workers experience lower average wages compared to their less agreeable peers. Building on these empirical findings, a life cycle model is developed to incorporate on-the-job search dynamics, personality traits, and skill accumulation. Through this model, I investigate how personality traits impact wages through job search processes and skill development over time. The findings suggest that personality trait heterogeneity significantly contributes to observed wage gaps, particularly through the on-the-job search channel.

Chapter 3 incoporates a blend of standard job skill measures, an innovative measure of overall skill growth at the individual level, and PIAAC test scores. This unique combination allows for a more nuanced understanding of wage level and growth variations across individuals. The results underscore the importance of specific job skill information in explaining wage levels, while the skill growth measure significantly enhances our understanding of wage growth dynamics. Additionally, the inclusion of PIAAC test scores reduces wage differentials, for race and gender.

Chapter 4 examines the relationship between skill-increasing activities, self-reported skill changes, and wage growth. Using data from LISA, the study shows that skill changes follow expected patterns based on age and education, as previously suggested by Becker (1964) and Ben-Porath (1967). Both the quantity and types of skill-increasing activities predict wage growth. More activities tend to boost wages, especially for those with low to mid-level education. Different activities have different impacts: independent activities help low educated workers, while formal training and group-oriented activities tend to benefit those with mid and high levels of education. This research suggests that simple and inexpensive measures of skill development can be valuable for understanding the link between skill accumulation, skill investment returns, and wages over time.

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