Dita Eckardt (LSE), “Are Chemists Good Bankers? Returns to the Match between Training and Occupation”


Leacock Building Leacock 429, 855 rue Sherbrooke Ouest, Montreal, QC, H3A 2T7, CA

Dita Eckardt (LSE)
Date: January 24, 2020
Time and Location: 10:00 a.m., Leacock 429

Individuals are often trained in a specific field but work in another. This paper analyses the returns to different training-occupation combinations. To this end, I use an administrative employment panel which contains the apprenticeship training for a large sample of workers in Germany. In this context, 70% of individuals with at least upper-secondary education hold apprenticeships, and 40% of these work in occupations they were not trained for. I combine the administrative data with historical data on occupation-specific vacancies to causally identify the returns. To implement the identification strategy, I set up an augmented Roy model and extend existing control function approaches to deal with selection in a two-stage, high-dimensional setting. The results suggest that workers trained in their current occupation earn 10−12% more than workers trained outside their occupation, and that not controlling for selection leads to substantial negative bias. I find considerable heterogeneity in the estimated returns and use task content data to show that returns to training-occupation combinations are decreasing in the task distance between training and occupation. Finally, I argue that ex-ante imperfect information may lead to training choices that are suboptimal ex-post and find that, as a result, 4−6% of wages are foregone for the average worker.Back-of-the-envelope calculations suggest that retraining programmes could be very effective in addressing this friction