Worker Reallocation across Occupations: Confronting Data with Theory

This paper studies the secular behavior of worker reallocation across occupations in the U.S. labor market. In the empirical analysis, we use microdata to construct consistent time series over a forty-five year period, and document that the fraction of employment reallocated annually across occupations is highly stable in the long run. We go beyond description and use an equilibrium model to identify potential changes in the productivity shocks and mobility costs that govern worker reallocation across occupations. We uncover the joint evolution of these factors by deriving a simple mapping between data and the model. Our analysis shows that constant reallocation rates across occupations mask slow-moving increases in the volatility of productivity shocks since the mid-1980s, and a pronounced upward shift in the cost of switching occupations in the period surrounding the Great Recession.