Multidimensional Skill Specialization and Mismatch Over the Lifecycle

In this paper, I investigate multidimensional skill mismatch and specialization over the lifecycle. I first present a model of labour choice with heterogeneous worker skills and occupational skill intensities that has 2 key features. Workers accumulate skill over time and frictions inhibit the perfect assignment of workers to occupations. The model yields four implications: (1) some workers will start in occupations for which they are not well suited; (2) due to skill accumulation, some workers who began mismatched will voluntarily continue to use the skill associated with the mismatched occupation, instead of their initial comparative advantage ability; (3) workers who switch occupations that differ in skill intensity hold skill portfolios that are more diversified than those who specialize; (4) there is a larger incidence of workers who switch from mismatched occupations to better matches than vice versa. I then test these implications using U.S. longitudinal data. The data shows the four predictions are statistically valid. For example, workers are likely to specialize within one skill - even when that skill is not a worker's initial comparative advantage. Both the model and data demonstrate the severity of mismatch diminishes over the lifecycle, due to occupation switching and skill accumulation