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The Roy Model

Two-sector model of self-selection . ReferencesA.D. Roy (1951), Heckman and Honore (1990, EMA)Relevant for theory of occupational choice (blue collar, white collar), union choiceeducational self-selection (high school, college)Two occupational choicesfishermanHunterSkill endowments (F, H) k

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The Roy Model

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    1. The Roy Model ECON 721

    2. Two-sector model of self-selection References A.D. Roy (1951), Heckman and Honore (1990, EMA) Relevant for theory of occupational choice (blue collar, white collar), union choice educational self-selection (high school, college) Two occupational choices fisherman Hunter Skill endowments (F, H) known to individuals

    3. Distribution of skills Talent matters more in occupation with higher variance in skills

    6. What is the average amount of fish for those who chose the fishing occupation?

    7. What is the total supply of fish in the population? As the price of fish increases, more people become fisherman and the supply of fish increases

    8. Think of a Production Possibility Frontier that Determines the Aggregate Supply of fish and hunting output

    9. What are the implications of self-selection for the distribution of earnings?

    12. Are earnings for hunters or fisherman higher or lower than they would be if assignment to occupations were random?

    17. How does change in price affect average ability levels?

    18. Absolute Advantage Case (best hunters are best fisherman)

    19. Absolute Advantage Case (best hunters are best fisherman)

    20. Comparative Advantage Case (best hunters are worst fisherman)

    21. Comparative Advantage Case (best hunters are worst fisherman)

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