Misallocation of Talent

Top 8 Paid (in 1960) Occupation Share. Health diagnosing, engineer, lawyer,…etc


  • Occupation share within group (white men, white women, black men, black women) should be similar across groups since distribution of talent should be similar across groups
  • With a looser assumption, even though the talent distributions are not the same, they should not change much in the past 50 years in the US. Then where did all these occupation share changes coming from? Frictions that hider some groups from pursuing the required human capital to get in certain occupations, and frictions that block some group of people from entering certain frictions.
  • wedges that attach to cohorts are interpreted as “human capital frictions,” wedges that attach to years are interpreted as “labor market frictions.”
  • A roy model is used for occupation choice (structure is less complex than BLP). The key observation is that price (wage occupation gap) does not change much, but quantity (share gap) changes a lot. Price is used to identify the group specific occupation preference; quantity is used to identify the frictions.
  • 40% of GDP growth can be explained by the frictions


  • Most developing country context paper looks at “level” effect (increasing the education level, or increasing the education quality), but less has been discussed about the “composition effect.”
  • Tomasso has a paper on human side of structural transformation: increase of education level accounts for 20% of decrease of agricultural employment.
  • The typical occupation (self-employment vs work for others) choice model in development econ is about “wealth” and liqudity. Occupational Choice and the Process of Development (1993) JPE
  • What about working in NGO and public sector
  • There is a scene in “One flew over the Cuckoo’s Nest.” Murphy brings the boys to the boats and tell the boat guard that they are doctors. Back in 1960–70, this would not make sense if they are all black men. I like the choice that the “crazy” people are all white and the institution guards are all black.



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