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The Economics of Has-beens

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  • Glenn MacDonald
  • Michael S. Weisbach

Abstract

The evolution of technology causes human capital to become obsolete. We study this phenomenon in an overlapping generations setting, assuming that technology evolves stochastically and that older workers find updating uneconomic. Experience and learning by doing may offer the old some income protection, but technology advance always turns them into has-beens to some degree. We focus on the determinants (demand elasticities, persistence of technology change, etc.) of the severity of the has-beens effect. It can be large, even leading to negatively sloped within-occupation age-earnings profiles and an occupation dominated by a few young, high-income workers. Architecture displays the sort of features the theory identifies as magnifying the has-beens effect, and both anecdotes and some data suggest that the has-beens effect in architecture is extreme indeed.

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  • Glenn MacDonald & Michael S. Weisbach, 2004. "The Economics of Has-beens," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 289-310, February.
    • Handle: RePEc:ucp:jpolec:v:112:y:2004:i:s1:p:s289-s310
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    2. Tobias Schultheiss & Uschi Backes-Gellner, 2021. "Different degrees of skill obsolescence across hard and soft skills and the role of lifelong learning for labor market outcomes," Economics of Education Working Paper Series 0188, University of Zurich, Department of Business Administration (IBW), revised Sep 2022.
    3. Kristiina Huttunen, 2005. "R&D Activity, Exports, and Changes in Skill Demand in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 18(2), pages 72-85, Autumn.
    4. Meyer, Jenny, 2007. "Older Workers and the Adoption of New Technologies," ZEW Discussion Papers 07-050, ZEW - Leibniz Centre for European Economic Research.
    5. Brox, James A. & Carvalho, Emanuel, 2008. "A Demographically Augmented Shift-Share Employment Analysis: An Application to Canadian Employment Patterns," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1), pages 1-11.
    6. Inés P. Murillo, 2011. "Human capital obsolescence: some evidence for Spain," International Journal of Manpower, Emerald Group Publishing Limited, vol. 32(4), pages 426-445, July.
    7. Centeno, Mário & Corrêa, Márcio, 2010. "Job matching, technological progress, and worker-provided on-the-job training," Economics Letters, Elsevier, vol. 109(3), pages 190-192, December.
    8. Fillmore, Ian & Hall, Jonathan D., 2021. "Technological change and obsolete skills: Evidence from men’s professional tennis," Labour Economics, Elsevier, vol. 73(C).
    9. Perri, T. J., 2003. "The cost of specialized human capital," Economics of Education Review, Elsevier, vol. 22(4), pages 433-438, August.
    10. Madiès, Thierry & Villeval, Marie Claire & Wasmer, Malgorzata, 2013. "Intergenerational attitudes towards strategic uncertainty and competition: A field experiment in a Swiss bank," European Economic Review, Elsevier, vol. 61(C), pages 153-168.
    11. Luc Behaghel, 2006. "Changement technologique et formation tout au long de la vie," Revue économique, Presses de Sciences-Po, vol. 57(6), pages 1351-1382.
    12. Donald E. Bowen III & Laurent Frésard & Jérôme P. Taillard, 2017. "What’s Your Identification Strategy? Innovation in Corporate Finance Research," Management Science, INFORMS, vol. 63(8), pages 2529-2548, August.
    13. Jun Han & Wing Suen, 2011. "Age structure of the workforce in growing and declining industries: evidence from Hong Kong," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 167-189, January.
    14. Alders, Peter, 2005. "Human capital growth and destruction: the effect of fertility on skill obsolescence," Economic Modelling, Elsevier, vol. 22(3), pages 503-520, May.
    15. Vikas Mehrotra & Randall Morck, 2017. "Governance and Stakeholders," NBER Working Papers 23460, National Bureau of Economic Research, Inc.
    16. Weinberg, Bruce A., 2004. "Experience and Technology Adoption," IZA Discussion Papers 1051, Institute of Labor Economics (IZA).
    17. David J Deming & Kadeem Noray, 2020. "Earnings Dynamics, Changing Job Skills, and STEM Careers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 1965-2005.
    18. Tervio, Marko, 2003. "Mediocrity in Talent Markets," Institute for Research on Labor and Employment, Working Paper Series qt7411j2vx, Institute of Industrial Relations, UC Berkeley.
    19. Schneider, Lutz, 2007. "Alterung und technologisches Innovationspotential : Eine Linked-Employer-Employee-Analyse," IWH Discussion Papers 2/2007, Halle Institute for Economic Research (IWH).
    20. Cörvers, F. & Kriechel, B. & Montizaan, R.M., 2006. "Scenario-analyse van de vervangingsvraag tot 2010," ROA Working Paper 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    21. de Grip, A., 2006. "Evaluating human capital obsolescence," ROA Working Paper 2E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    22. Meyer, Jenny, 2008. "The Adoption of New Technologies and the Age Structure of the Workforce," ZEW Discussion Papers 08-045, ZEW - Leibniz Centre for European Economic Research.

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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