Occupational Choice and Dynamic Indeterminacy

This paper construct a two-sector model of two-period lived overlapping generations with endogenous occupational choice where ability-heterogeneous agents choose whether to become educated when young and henceforth to become skilled when old. We show that endogenous occupational choice in this two-sector framework can result in dynamic indeterminacy without complicate preferences/technologies and without requiring the consumption-good production to be more capital-intensive.