Liuben Siarov

• We explore lifelong learning and the job mobility it enables as a means of risk insurance on the labor market. We develop a formal micro-level theoretical model of individual investments in human capital and use option valuation theory to derive a formula for the ex-ante valuation of training benefits on the individual level under conditions of uncertainty. When training is considered as an entitlement to the right to switch job positions, we find that its returns may manifest through its insurance character rather than direct monetary benefits. We next perform one of the first studies on the relationship between spells of general and specific training within individual histories. Using German panel data, we show that in line with our model and unlike the predictions of extant literature, events of different types tend to delay (but not necessarily inhibit) each other, a result we attribute to the interdependence of the payoffs to general and specific training introduced by job mobility considerations. We finally study the characteristics of occupations to delve deeper in the relationship between risk, human capital, and occupational wages. On the basis of US data, we show that occupations characterized by higher levels of wage risk do offer higher remuneration, with our model explaining over 75 percent of occupational wage differentials. We also show that wage risk that cannot be managed by mobility has a much greater impact on wage formation than total wage risk. We demonstrate that the skill requirements and the ease of mobility in and out of the job are crucial to its position within the structure of the market. In conclusion, labor market risk exposure matters for lifelong learning investments, training being one of the key instruments of market-based risk management. The skill allocation across the labor market and individual adaptive action via human capital accumulation over the life course are important aspects of the dynamics of labor market structures.