Job Specialization And Labor Market Turnover
Speaker(s) Mr. Murali Srinivasan, PhD student, Ohio State University, USA Publication Conference room on 7th Floor, Central Office Building, Reserve Bank of India, Fort, Mumbai 400001

The purpose of this paper is to investigate the decline in labor market turnover in the recent decades, in particular the job separation rate. I analyze the role of increase in specialization of jobs in accounting for this decline. First, I use the data from NLSY79 and combine the data on skills from ASVAB and O*NET to provide an estimate of job specialization. I show that the job specialization has increased by 15 percentage points over time. Next, to quantify the impact of this increasing job specialization on lab or market turnover, I propose an equilibrium search and matching model with two-sided ex-ante heterogeneity. Firms create jobs with different skill requirements while the workers are endowed with different skills and the specialization of a job determines the substitutability between the worker skills. I show that, as the jobs get more specialized, my model can explain more than 50% of the decrease in the separation rate. The key mechanism is, as the substitutability between worker skills falls, well matched firms and workers hold on to their match for much longer, and the proportion of well matched workers and jobs increases. This causes the aggregate separation rate to fall.

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