Dissertation Abstract ___________________________________________________________
This dissertation consists of three essays that study occupation choice among wage workers and self-employed workers. In the US, the annual voluntary turnover rate of employees is around 23%, which consists mainly of wage workers moving between occupations and industries, or switching from wage work to self-employment. The main objective of this research is to contribute to our understanding of some economic determinants of occupational choice.
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Essay 1. Who Benefits from Firm Growth? An Analysis of Technology Effects on Job Turnover
Motivated by the previous empirical finding that white-collar workers had higher turnover rates than blue-collar workers during firm expansion, this paper develops a search model under circumstances of technological change. It predicts a higher probability of quitting for workers with technology-specific skills when firm growth is driven by technological advance. Even amongst jobs not directly related to production, high-ranked workers show a higher tendency to quit jobs when facing technological change within the firm. An individual-based dataset is constructed from the Panel Study of Income Dynamics to test the predictions of the model. I find evidence that supports a higher probability of quitting for high-ranked technology professionals throughout the period of technological change, as compared with low-end technology workers.
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Essay 2. Wealth Constraints and Self-Employment: Evidence from Birth Order [Job Market Paper]
Apart from being an employee, starting one’s own business is an alternative occupational choice. In this essay, I revisit the question of whether entrepreneurs face liquidity constraints in business formation. The principle challenge is that wealth is correlated with unobserved ability, and adequate instruments are often difficult to identify. This paper uses the son’s birth order as an instrument for household wealth. The instrument would likely not be useful in Western data, but it is in many non-Western cultures where primogeniture remains important. I exploit the data available in the Korean Labor and Income Panel Study, and find evidence of liquidity constraints associated with self-employment in South Korea.
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Essay 3. Specific Skills, Diversified Skills, or A Taste for Variety: An Analysis of Self-Employment in South Korea
Another aspect of the determinants of self-employment is linked to a person’s work experience. Previous empirical studies find a positive relationship between these two variables and interpret it as the effect on self-employment of diversified skills or a taste for variety. However, the pattern of job change is essential to the development of either specific skill or diversified skills. The theory of skill diversity or taste for variety is more relevant for the case in which workers moved around between occupational fields and industries. Using a unique data set from the Korean labor market, the third essay attempts to construct detailed employment history variables to capture four different career paths. By doing so, the effect of specific skills on self-employment can be carved out from the overall effect of work experience. Comparing this result to previous empirical evidence provides us with a better understanding of the mechanism through which previous work experience affects self-employment.
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