TEL  Vol.5 No.2 , April 2015
Private Incentives for Specialization in a Changing and Unpredictable Labor Market
Author(s) Francisco Parro
ABSTRACT
Technological change is a distinctive characteristic of modern labor markets. New technologies change the demand for different skills in the labor market and thus introduce uncertainty in the wage structure that agents will face in the future. In this way, technological change affects agents decisions about which skills to invest in. In this paper, I study how labor market uncertainty arising from technological change influences the private incentives for specialization. I show that in a world populated by risk-averse agents, technologies that generate a positive covariance of wages across sectors or tasks within sectors will strengthen the incentives for specialization, whereas technological progress that generates a negative covariance of wages will generate strong private incentives for agents to become generalists. Therefore, there is no unique relationship between technological progress and specialization. The nature of the new technologies introduced in the labor market is what matters.

Cite this paper
Parro, F. (2015) Private Incentives for Specialization in a Changing and Unpredictable Labor Market. Theoretical Economics Letters, 5, 163-168. doi: 10.4236/tel.2015.52020.
References
[1]   Rosen, S. (1983) Specialization and Human Capital. Journal of Labor Economics, 1, 43-49.
http://dx.doi.org/10.1086/298003

[2]   Baumgartner, J.R. (1988) Physicians Services and the Division of Labor across Local Markets. Journal of Political Economy, 96, 948-982.
http://dx.doi.org/10.1086/261571

[3]   Kim, S. (1989) Labor Specialization and the Extent of the Market. Journal of Political Economy, 97, 692-705.
http://dx.doi.org/10.1086/261622

[4]   Becker, G.S. and Murphy, K.M. (1992) The Division of Labor, Coordination Costs, and Knowledge. Journal of Political Economy, 107, 1137-1160.
http://dx.doi.org/10.2307/2118383

[5]   Autor, D.H., Levy, F. and Murnane, R.J. (2003) The Skill Content of Recent Technological Change: An Empirical Investigation. Quarterly Journal of Economics, 118, 1279-1333.

[6]   Autor, D.H., Katz, L.F. and Kearney, M.S. (2006) The Polarization of the US Labor Market. American Economic Review, 96, 189-194.

[7]   Goos, M. and Manning, A. (2007) Lousy and Lovely Jobs: The Rising Polarization of Work in Britain. Review of Economics and Statistics, 89, 118-133.
http://dx.doi.org/10.1162/rest.89.1.118

[8]   Acemoglu, D. and Autor, D.H. (2010) Skills, Tasks and Technologies: Implications for Employment and Earnings. National Bureau of Economic Research Working Paper 16082, Cambridge.

 
 
Top