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

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

Abstract:
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