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Bookworms versus Party Animals: An Artificial Labor Market with Human and Social Capital Accumulation

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  • Dan Farhat

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    (Department of Economics, University of Otago)

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    Abstract

    Data show that educated workers earn higher wages and experience lower unemployment rates. Some researchers believe this occurs because education improves a worker's productivity (or human capital), making them more desirable on the job market. Other researchers believe schooling improves a worker's network (or social capital), giving them more information about lucrative openings and more resources to secure a job (such as references from peers). Much of the research on human and social capital focuses on why schooling benefits workers, but often overlooks how education produces these outcomes. This paper develops an agent-based complex adaptive system that features human and social capital accumulation, formal schooling and on-the-job training, labor market search and durable employment contracts to explain the process linking education to labor market outcomes and economic performance. Sample simulations show that human capital accumulation explains many of the novel facts seen in the data while social capital alone is not enough.

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    File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_1103.pdf
    File Function: This version, 2011
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    Bibliographic Info

    Paper provided by University of Otago, Department of Economics in its series Working Papers with number 1103.

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    Length: 28 pages
    Date of creation: May 2011
    Date of revision: May 2011
    Handle: RePEc:otg:wpaper:1103

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    Related research

    Keywords: Agent-based modelling; human capital; social capital; macroeconomic impacts of education.;

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    1. Paul Windrum & Giorgio Fagiolo & Alessio Moneta, 2007. "Empirical Validation of Agent-Based Models: Alternatives and Prospects," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 10(2), pages 8.
    2. Giovanni Dosi & Giorgio Fagiolo & Roberto Gabriele, 2004. "Towards an Evolutionary Interpretation of Aggregate Labor Market Regularities," LEM Papers Series 2004/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Tesfatsion, Leigh S., 2009. "Structure, Behavior, and Market Power in an Evolutionary Labor Market with Adaptive Search," Staff General Research Papers 1681, Iowa State University, Department of Economics.
    4. Kugler, Adriana D., 2003. "Employee referrals and efficiency wages," Labour Economics, Elsevier, vol. 10(5), pages 531-556, October.
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    6. Tesfatsion, Leigh, 2007. "Agents come to bits: Towards a constructive comprehensive taxonomy of economic entities," Journal of Economic Behavior & Organization, Elsevier, vol. 63(2), pages 333-346, June.
    7. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
    8. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
    9. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 445-64, July.
    10. Tesfatsion, Leigh S., 2002. "Agent-Based Computational Economics: Growing Economies from the Bottom Up," Staff General Research Papers 5075, Iowa State University, Department of Economics.
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    12. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
    13. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
    14. Blaug, Mark, 1985. "Where are we now in the economics of education?," Economics of Education Review, Elsevier, vol. 4(1), pages 17-28, February.
    15. Simon Gemkow & Michael Neugart, 2011. "Referral hiring, endogenous social networks, and inequality: an agent-based analysis," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 703-719, October.
    16. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    17. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
    18. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
    19. Brunello, Giorgio & Medio, Alfredo, 2000. "An Explanation of International Differences in Education and Workplace Training," IZA Discussion Papers 114, Institute for the Study of Labor (IZA).
    20. Riccardo Boero & Flaminio Squazzoni, 2005. "Does Empirical Embeddedness Matter? Methodological Issues on Agent-Based Models for Analytical Social Science," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 8(4), pages 6.
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