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Abstract

Temporary booms affect sectors as varied as commodities, construction, and tech. I study how uncertainty about the boom's duration shapes labor mobility across sectors. I build a model of sector-specific human capital accumulation and show that workers in booming sectors can exhibit risk-loving attitudes towards duration. Unlike in settings where uncertainty necessarily increases the value of waiting, human capital accumulation acts as a force in the opposite direction and leads to ambiguous effects of uncertainty on the margin. Then, I turn to an empirical investigation of the effects of duration uncertainty during the boom in mineral prices of 2011-2018, driven by a construction boom in China. I estimate the model using financial data and novel administrative micro-data from Australia, an exporter of mineral products to China. I use the quantified model to study a counterfactual perfect foresight economy in which the mining boom was temporary and duration known. I find that the share of employment in mining in Australia would have increased from 3.7% to 4.4%, and the relative wage in the sector would have been substantially lower, indicating that duration uncertainty deterred labor supply and contributed to the rise in wage inequality during this boom.

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