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The Business Cycle Human Capital Accumulation Nexus and its Effect on Labor Supply Volatility

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Author Info

  • Diana Alessandrini

    ()
    (Department of Economics and finance, University of Guelph, Canada)

  • Stephen Kosempel

    (Department of Economics and finance, University of Guelph, Canada)

  • Thanasis Stengos

    (Department of Economics and finance, University of Guelph, Canada)

Abstract

This paper studies the cyclicality of human capital accumulation by using a lifecycle RBC model with two types of heterogeneity: age and productivity in learning. Results show that individuals invest more in human capital during economic downturns. In particular, schooling acts as a buffer sector and allows agents to compensate for the shock by accumulating more human capital. However, human capital accumulation is more countercyclical for young and low-productivity individuals because they face lower opportunity costs of education and a higher marginal product of human capital. These results are confirmed empirically using US data from the Current Population Survey.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 62_12.

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Date of creation: Aug 2012
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Handle: RePEc:rim:rimwps:62_12

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Keywords: human capital accumulation; business cycles; labor supply;

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  1. Erik Canton, 2002. "Business cycles in a two-sector model of endogenous growth," Economic Theory, Springer, vol. 19(3), pages 477-492.
  2. Dellas, Harris & Sakellaris, Plutarchos, 1996. "On the cyclicality of schooling: Theory and evidence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Freddy Heylen & Lorenzo Pozzi, 2007. "Crises and human capital accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1261-1285, November.
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