The Link between Ability and Specialization: An Explanation for Observed Correlations between Wages and Mobility Rates

Wage levels and turnover rates are negatively correlated across types of employment, and this fact is often interpreted as evidence that high-wage jobs are rationed. A simple training model illustrates, however, that this correlation may arise because able workers have an incentive to choose highly specialized jobs. In any job, the most able workers possess the most valuable stocks of specific skills and therefore face the highest mobility costs. Thus, able workers may have a comparative advantage in specialized employments. Data from the national Longitudinal Survey of Youth provide an opportunity to evaluate the merits of the training model developed here. Data on worker training and mobility provide support for several implications of the model. The model also provides new ways to interpret existing results in the literature on interindustry wage differentials.