Reallocation patterns across occupations

Using high-quality administrative data, I analyze workers' opportunity costs of reallocation across occupations by measuring the additional time spent in unemployment before being hired in a new occupation. Furthermore, I inspect the wage changes after reallocation and find that workers who change occupations through unemployment face wage losses. Interpreted through the lens of islands models in the spirit of Lucas/Prescott (1974), these findings are counterintuitive because workers would only reallocate when they can recoup the costs of reallocation through wage gains. To shed some light on the question of what other factors may drive reallocation, I further investigate whether other economic conditions of an occupation might be more important in the worker's decision to reallocate. I assess whether the workers direct their search across markets with respect to job finding rates and job separation rates and labor market tightness, finding that they play no decisive role.