Essays on sector-specific risk, educational choices, and mobility across sectors -PhD thesis-

Publication type

Thesis/Degree/Other Honours


Publication date

June 1, 2009


This thesis examines possible consequences of labour income risk for educational choices, sectoral mobility and the resulting skill allocation in the economy.

The second chapter analyses the choice of types of education in a stochastic two-period overlapping generations (OLG) model. Individuals can make a discrete choice between two types of education, qualifying them for occupation in either a ‘safe’ sector or a ‘risky’ sector. The chapter examines how sector-specific sectoral and idiosyncratic shocks in the risky sector are propagated over to the safe sector, and how these shocks affect the aggregate skill allocation. The chapter shows that the risky sector may suffer from persistent skills gaps when individuals are risk averse, markets for labour income risk are incomplete, and goods produced in the two sectors are not strong substitutes.

The third chapter extends the model of the second chapter to a stochastic three-period overlapping generations (OLG) model. Individuals who have chosen the risky education and have worked for one period in the risky sector can choose to migrate to the safe sector for the third and last period of their career. Sectoral mobility provides a type of insurance mechanism, but the degree of mobility and insurance this option provides depends on the transferability of skills across sectors.

The fourth chapter investigates the determinants of sectoral mobility of workers in the British Household Panel Survey (BHPS) between 1991 and 2004. The chapter analyses the effect of job and individual characteristics and financial variables on the likelihood of mobility between two digit sectors. The probability of sectoral migration increases with level of education, decreases with age and is higher for men than women. Job tenure and size of the employer reduce the likelihood of migration.



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