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Experience vs. Obsolescence: A Vintage-Human-Capital Model

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  • Kredler, Matthias

Abstract

I combine an infinite-horizon version of Ben-Porath’s (1967) model of human-capital accumulation with a vintage structure as in Chari & Hopenhayn (1991). Different skill levelsinside a vintage are complementary in production. Vintage-specific human capital is accumulated based on workers’ optimal strategies and is lost when the technology is phased out by an endogenous firm decision. I establish equivalence between competitive equilibrium and a planner’s problem. It is shown that returns to skill are highest in young vintages. Accelerated technological change shortens the life cycle of a technology and speeds up obsolescence; the premium on tenure rises because more workers are concentrated in young technologies with high skill premia. A calibration exercise comparing two steady states shows that the model quantitatively accounts for the changes in the experience premium, earnings dispersion and earnings turbulence in German data.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10200.

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Date of creation: 28 Jul 2008
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Handle: RePEc:pra:mprapa:10200

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Keywords: Vintage human capital; age-earnings profiles; partial differential equations;

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  1. Mark Hugget & Gustavo Ventura & Amir Yaron, 2002. "Human Capital and Earnings Distribution Dynamics," NBER Working Papers 9366, National Bureau of Economic Research, Inc.
  2. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(2), pages 633-687, June.
  3. Claudio Michelacci & Vincenzo Quadrini, 2005. "Financial Markets and Wages," NBER Working Papers 11050, National Bureau of Economic Research, Inc.
  4. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report, Federal Reserve Bank of Minneapolis 291, Federal Reserve Bank of Minneapolis.
  5. Fatih Guvenen & Burhanettin Kuruscu, 2007. "A Quantitative Analysis of the Evolution of the U.S. Wage Distribution: 1970-2000," NBER Working Papers 13095, National Bureau of Economic Research, Inc.
  6. Jakob Klette & Samuel Kortum, 2002. "Innovating firms and aggregate innovation," Staff Report, Federal Reserve Bank of Minneapolis 300, Federal Reserve Bank of Minneapolis.
  7. 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.
  8. Heckman, James J. & Lochner, Lance John & Todd, Petra E., 2003. "Fifty Years of Mincer Earnings Regressions," IZA Discussion Papers 775, Institute for the Study of Labor (IZA).
  9. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 243-284, April.
  10. Peter Gottschalk & Mary Joyce, 1997. "Cross-National Differences in the Rise in Earnings Inequality: Market and Institutional Factors," Boston College Working Papers in Economics, Boston College Department of Economics 366, Boston College Department of Economics.
  11. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  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, 01-2013.
  13. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1377-1404, 09.
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Cited by:
  1. Giovanni Mastrobuoni & Filippo Taddei, 2011. "Age Before Beauty? Productivity and Work vs. Seniority and Early Retirement," CeRP Working Papers 120, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  2. Boyan Jovanovic, 2008. "When Should Firms Invest in Old Capital?," NBER Working Papers 14000, National Bureau of Economic Research, Inc.

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