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Working Paper
Financial frictions and occupational mobility
An important risk faced by individuals is labor income risk associated with changes in demand for an individual?s selected occupation. This risk reflects uncertainty about future income on the current job. As an example, the declining competitiveness of the U.S. automobile or steel sectors are events that are unanticipated from the perspective of a worker, yet have a strong bearing on future labor income for these workers. One way to limit labor income risk is by switching occupations. This, however, is costly because of retraining costs, forgone earnings, and lost occupational specific ...