Occupational Choice with Endogenous Spillovers

Recognition Program

Authors: Facundo Albornoz, Antonio Cabrales and Esther Hauk

The Economic Journal, Vol. 129, No 621, 1953-1970, July, 2019

We study a model that integrates productive and socialising efforts with occupational choice, and endogenous spillovers. We show that more talented individuals work harder and contribute more to externalities, but also have incentives to segregate. Average socialising increases the productivity of the occupation. The size of an occupation grows with its synergies. Individuals underinvest in productive and socialising effort, and sort themselves inefficiently into occupations. We derive the optimal subsidy for sorting into different occupations. Finally, we derive a rule to identify overpopulated sectors and establish the connection between inequality of talents, socialising, productive efforts and occupation size.

This paper originally appeared as Barcelona School of Economics Working Paper 972
This paper is acknowledged by the Barcelona GSE Research Recognition Program