Seminar in Empirical Microeconomics - It Runs in the Family: Occupational Choice and the Allocation of Talent
Thursday, 20. April 2023
12:00 - 13:15
Chair of Political Economy
Jósef Sigurðsson (Stockholm University)
It Runs in the Family: Occupational Choice and the Allocation of Talent
Abstract: Children frequently grow up to work in the same jobs as their parents. Using unique data on worker skills and personality traits, and administrative data on the labor market outcomes of Swedish men, we study occupational choice and its impact on the allocation of talent. We document that sons are disproportionately more likely to follow into the same occupation as their fathers, across all skills and earnings levels. On average, sons are more likely to follow if their skills align with those of incumbents in their father’s occupation. Still, we find that a decline in a father’s occupation leads to less following, better skill match, and higher income. We estimate a general equilibrium Roy model with costly occupational choice and heterogeneous entry barriers depending on parental background. We find that these entry barriers lead to misallocation: Equalizing entry costs across workers leads occupational following to fall by half. However, this reallocation of workers increases intergenerational mobility and aggregate income only modestly, because when sorting on comparative advantage sons move to occupations similar to those of their fathers in terms of income and skill requirements. Our findings suggest that increasing intergenerational occupational mobility would bring limited efficiency gains.