empirical prediction is the dynamics of wage dispersions. Wage variation decreases over time in the Bandit model, while it increases in the stepping-stone model.

This paper investigates the role of education and ability in explaining the process of occupational mobility among young people. On this point, the literature shares a couple of thoughts on the role of education. First, Johnson (1978) conjectures that the subjective uncertainty about own ability is likely to be small among the relatively educated. Second, education may increase learning speed (Rosenzweig, 1995; Rosen, 1972).<sup>9</sup> Third, in the context of stepping-stone mobility, skill transferability can be an increasing function of education (general human capital vs specific human capital). Separately from the above line of research, Sicherman and Galor (1990) showed that schooling increases the likelihood of occupational upgrading. They find that education significantly increases career mobility controlling for occupation types (defined at the one digit level). This finding is consistent with Neal (1999), who supports two-stage search behavior, under which workers change their careers primarily in the early stage and tend to change only employers (firms) later.

In a different context, Yamauchi (2004) showed evidence for complementarity between schooling and destination experience among migrants in the Bangkok labor market. Upon arrival at the destination market, migrants start learning about their own abilities and their match to potential occupations. Wage growth is higher among educated migrants since they are matched to occupations that require a higher dimension of skills. A Bayesian learning model is built to generate a difference in wage growth between the educated and uneducated. The current study also shows that labor market experience and schooling are complementary.

The current study also highlights the role of ability, often unobserved but still measured by certain test scores, in determining labor market wages. Farber and Gibbons (1996) showed that time invariant variables correlated with ability but unobserved by employers are increasingly correlated with wages as experience increases. They also claimed that the role of education does not depend on labor market experience. The analysis in Section 4 uses academic achievement test scores to understand how the test scores affect changes in their occupations and wages. The findings are similar to those of Farber and Gibbons (1996), that is, ability appears to augment returns to experience.

This paper uses unique panel data of adolescents and young adults in the Philippines to disentangle wage dynamics and job changes in the labor market. In the literature on developing countries, details of labor market behavior especially among youth typically remain veiled due to lack of appropriate data. Our survey was implemented in eight provinces of the Philippines in 2010-2011, tracking 3,451 former students from 101 elementary schools to capture their schooling, work and family histories. The team used the grade-6 national achievement test score data to match with the sample students. This unique data set enables us to understand details of wage dynamics and work experience during the transition from school to labor markets.

The survey data record the most-updated monthly wage for each type of work among various work characteristics. If work contents (e.g., positions) changed, we traced wages even within the same firm. Thus an increase in wages associated with promotion within a firm was recorded. Examples include a

> 9 In an input target model, Rosenzweig (1995) argues that educated agents have a better precision in the learning process, which results in faster learning. For a more recent summary of related studies, see Rosenzweig (2010).

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