Technological Changes and the Labor Market – A GE Model with Multidimensional Skills

In this paper we develop and estimate a multi-sector general equilibrium growth model of education and sector-occupation choices over the life cycle. The model incorporates the task-based approach by representing jobs in different sector-occupation pairs as different bundles of tasks, requiring specific skill sets of workers. Workers are born with heterogeneous endowments of skills that can be improved over time by schooling and on-the-job accumulation of human capital. They supply their entire bundle of skills to a single job according to a Roy-type sorting model here their selections are along the multi-dimensional vector of skills that they possess. We use data from several U.S. sources that allow us to estimate parameters that correspond to both the decision process of the individuals as well as the parameters that correspond to the production side of the economy. The general equilibrium nature of the model allows us to conduct several policy counterfactuals that take full account of the responses in the economy.