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I examine how social status affects occupational sorting in a model with two occupations, academia and finance. Workers care about wages and social status, which has two components: occupational prestige (the occupation’s rank among other occupations) and local status (the worker’s within-occupation rank). The main insight is that the two components of social status act as complements: If the local status component plays an important role in academia, then academia attracts many high-skilled workers, which increases academia’s prestige and compensates the low-ranked academics for their meager local status. Consequently, social status can influence occupational sorting profoundly if workers value both components of status.
Link to paper: www.pawelgola.com/StatusLabourMarketsGola
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