Date of Original Version

8-2010

Type

Working Paper

Rights Management

All Rights Reserved

Abstract or Description

In this paper, we examine optimal job choices when jobs differ in the rate at which they reveal information about workers’ skills. We show that informational differences across jobs give rise to experimentation in that workers may be willing to sacrifice current period output in order to take jobs where learning is fast. In addition, we find that while experimentation is the most valuable when workers are young and inexperienced, the optimal level of experimentation is initially small, rises as workers gain experience and then eventually declines. We also find that job transitions and wage growth over the life-cycle are more involved than predicted by existing models. In addition, we use our model to shed light on the importance of job diversity and early career outcomes to future wage growth and on why identical workers (along both observable and unobservable dimensions) may experience distinct career outcomes even in the long run. Finally, we show that our model’s prediction are broadly consistent with known patterns of wage dynamics and job transitions.