Staff Report 470

Supplementary Appendix: Careers in Firms—Estimating a Model of Job Assignment, Learning, and Human Capital Acquisition

Elena Pastorino | Visiting Scholar

Revised June 3, 2013

In this appendix I present details of the model and the empirical analysis, and results of counterfactual experiments omitted from the paper. In Section 1 I describe a simple example that illustrates how, even in the absence of human capital acquisition, productivity shocks, or separation shocks, the learning component of the model can naturally generate mobility between jobs within a firm and turnover between firms. I also include the proofs of Propositions 1 and 2 in the paper. In Section 2 I discuss model identification in detail, where, in particular, I prove that information in my data on the performance ratings of managers allows me to identify the learning process separately from the human capital process. In Section 3 I describe the original U.S. firm dataset of Baker, Gibbs, and Holmström (1994a,b), on which my work is based. In Section 4 I provide details about the estimation of the model, including the derivation of the likelihood function, a description of the numerical solution of the model, and a discussion of the results from a Monte Carlo exercise showing the identifiability of the model’s parameters in practice. There I also derive bounds on the informativeness of the jobs of the competitors of the firm in my data, based on the estimates of the parameters reported in the paper. Finally, in Section 5 I present estimation results based on a larger sample that includes entrants into the firm at levels higher than Level 1. Results of counterfactual experiments omitted from the paper are contained in Tables A.12–A.14.

RELATED PAPER: Staff Report 469 Careers in Firms: Estimating a Model of Job Assignment, Learning, and Human Capital Acquisition

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