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Business Cycle Fluctuations and the Life Cycle: How Important is On-The-Job Skill Accumulation?

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  • Gary D. Hansen
  • Selo Imrohoroglu

Abstract

We study the effects of on-the-job skill accumulation on average hours worked by age and the volatility of hours over the life cycle in a calibrated general equilibrium model. Two forms of skill accumulation are considered: learning by doing and on-the-job training. In our economy with learning by doing, individuals supply more labor early in the life cycle and less as they approach retirement than they do in an economy without this feature. The impact of this feature on the volatility of hours over the life cycle depends on the value of the intertemporal elasticity of labor supply. When individuals accumulate skills by on-the-job training, there are only weak effects on both the steady-state labor supply and its volatility over the life cycle.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13603.

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Date of creation: Nov 2007
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Publication status: published as Hansen, Gary D. & Imrohoroglu, Selahattin, 2009. "Business cycle fluctuations and the life cycle: How important is on-the-job skill accumulation?," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2293-2309, November.
Handle: RePEc:nbr:nberwo:13603

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  1. Paul Gomme & Richard Rogerson & Peter Rupert & Randall Wright, 2004. "The business cycle and the life cycle," Working Paper 0404, Federal Reserve Bank of Cleveland.
  2. Yongsung Chang & Joao Gomes & Frank Schorfheide, 2002. "Learning by Doing as a Propagation Mechanism," Macroeconomics, EconWPA 0204002, EconWPA.
  3. Alan Blinder & Yoram Weiss, 1974. "Human Capital and Labor Supply: A Synthesis," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 435, Princeton University, Department of Economics, Industrial Relations Section..
  4. Hansen, G.D., 1991. "The Cyclical and Secular Behavior of the Labor Input : Comparing Efficiency Units and Hours Worked," Papers, California Los Angeles - Applied Econometrics 36, California Los Angeles - Applied Econometrics.
  5. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  6. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, Econometric Society, vol. 53(3), pages 503-43, May.
  7. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 12(4), pages 696-715, November.
  8. Rosen, Sherwin, 1976. "A Theory of Life Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S45-67, August.
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  10. Gary Hansen & Selahattin Imrohoroglu, 2008. "Consumption over the Life Cycle: The Role of Annuities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 566-583, July.
  11. 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.
  12. Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(3), pages 465-89, July.
  13. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," 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. 45(2), pages 601-641, 05.
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  15. 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.
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Cited by:
  1. Audra J. Bowlus & Chris Robinson, 2010. "Human Capital Prices, Productivity and Growth," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20104, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  2. Nir Jaimovich & Seth Pruitt & Henry E. Siu, 2009. "The demand for youth: implications for the hours volatility puzzle," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 964, Board of Governors of the Federal Reserve System (U.S.).
  3. Jongsuk Han, 2013. "Cyclical Employment and Learning Ability," 2013 Meeting Papers, Society for Economic Dynamics 1022, Society for Economic Dynamics.
  4. Ohanian, Lee E. & Prescott, Edward C. & Stokey, Nancy L., 2009. "Introduction to dynamic general equilibrium," Journal of Economic Theory, Elsevier, Elsevier, vol. 144(6), pages 2235-2246, November.
  5. Cassou, Steven P. & Gorostiaga, Arantza & Uribe-Zubiaga, Iker, 2013. "Policy effects of the elasticity of substitution across labor types in life cycle models," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 59-70.

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