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Experience vs. obsolescence: A vintage-human-capital model

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  • Kredler, Matthias
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    Abstract

    I introduce endogenous human-capital accumulation into an infinite-horizon version of Chari and Hopenhaynʼs (1991) [4] vintage-human-capital model. Returns to skill and tenure premia are highest in young vintages, where skill is scarcest and agents accumulate human capital fastest. As the vintage ages, the skill premium decreases and vanishes entirely upon vintage death. Workers run through cycles of human-capital accumulation: their wages rise as they accumulate skill, undergo downward pressure as the technology ages, and finally drop sharply when the worker switches to a new technology. The results are in line with German linked employer–employee data: tenure premia are highest in young establishments, as well as in fast-growing industries, occupations and establishments. A calibration exercise suggests that human-capital accumulation is the most important determinant of workersʼ wage profiles, whereas changes to the price of skill and vintage productivity gains play a smaller quantitative role.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 150 (2014)
    Issue (Month): C ()
    Pages: 709-739

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    Handle: RePEc:eee:jetheo:v:150:y:2014:i:c:p:709-739

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    Web page: http://www.elsevier.com/locate/inca/622869

    Related research

    Keywords: Vintage human capital; Tenure-wage profiles;

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    1. Luis Garicano & Esteban Rossi-Hansberg, 2007. "Organizing Growth," NBER Working Papers 13705, National Bureau of Economic Research, Inc.
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    3. Raouf, BOUCEKKINE & David, DE LA CROIX & Omar, LICANDRO, 2006. "Vintage Capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006014, Université catholique de Louvain, Département des Sciences Economiques.
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    8. Violante, Giovanni L, 2001. "Technological Acceleration, Skill Transferability and the Rise in Residual Inequality," CEPR Discussion Papers 2765, C.E.P.R. Discussion Papers.
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    10. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
    11. Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 795-827.
    12. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
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    14. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
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