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Human capital accumulation over the life cycle under multiple sources of uncertainty

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  • Saïd Hanchane

    ()
    (LEST - Laboratoire d'économie et de sociologie du travail - CNRS : UMR6123 - Université de Provence - Aix-Marseille I - Université de la Méditerranée - Aix-Marseille II)

  • David Touahri

    ()
    (LEST - Laboratoire d'économie et de sociologie du travail - CNRS : UMR6123 - Université de Provence - Aix-Marseille I - Université de la Méditerranée - Aix-Marseille II)

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    Abstract

    In this paper, we analyse the human capital accumulation process over the life cycle of individuals under the hypothesis of earnings uncertainty. To do so, we develop a continuous time dynamic programming model which takes into account several sources of uncertainty, concerning the human capital accumulation process and the labour market. In particular, the risks over future wage rates and over-education are explicitly taken into account. The model permits an in-depth study of each source's effect of uncertainty on human capital investment. We demonstrate that investment in education may be encouraged, depending on the individual's perception of the different risks.

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    File URL: http://halshs.archives-ouvertes.fr/docs/00/06/60/37/PDF/human.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00010248.

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    Date of creation: 2004
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    Handle: RePEc:hal:wpaper:halshs-00010248

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00010248
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    Related research

    Keywords: Human capital; Life cycle; Risk; Stochastic optimal control;

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    1. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 52(4), pages 521-48, October.
    2. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, Econometric Society, vol. 69(5), pages 1127-60, September.
    3. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, July.
    4. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(4), pages 373-413, December.
    5. Anderberg, Dan & Andersson, Fredrik, 2003. "Investments in human capital, wage uncertainty, and public policy," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1521-1537, August.
    6. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 225-243, September.
    8. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(1), pages 66-84, March.
    9. Fan, Chengze, 1993. "Schooling as a job search process," Economics Letters, Elsevier, Elsevier, vol. 41(1), pages 85-91.
    10. Snow, Arthur & Warren, Ronald S, Jr, 1990. "Human Capital Investment and Labor Supply under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 195-206, February.
    11. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 352.
    12. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, Econometric Society, vol. 45(1), pages 1-22, January.
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