Learning by Problem Solving

We present a learning by doing model that relates wages and skill development to the level of job complexity. We test our hypotheses about the job complexity effect using German Sample of Integrated Biographies data. We find that when tenure is low, wage growth is positively related to job complexity and negatively related to initial skill level, just as in our model. We calibrate the model and find that employees receive a positive wage premium to the complexity of their job and that workers in highly complex occupations acquire twice as much skills throughout life compared to less complex occupations.