The U-Shapes of Occupational Mobility

Using administrative panel data on the entire Danish population we document a new set of facts characterizing occupational mobility. For most occupations, mobility is U-shaped and directional: both low and high wage earners within an occupation have a particularly large probability of leaving this occupation, and the low (high) earners tend to switch to new occupations with lower (higher) average wages. Exceptions are occupations with steeply rising (declining) productivity, where mainly the lower (higher) paid workers within this occupation tend to leave. The facts conflict with several existing theories that are used to account for endogeneity in occupational choice, but it is shown analytically that the patterns are explained consistently within a theory of sorting under absolute advantage that includes learning about workers’ abilities.