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Accounting for changing returns to experience

Author

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  • Hendricks Lutz

    (University of North Carolina, Chapel Hill, Chapel Hill, NC, USA)

Abstract

Returns to experience for U.S. workers have changed over the post-war period. This paper argues that a simple model goes a long way towards replicating these changes. The model features three well-known ingredients: (i) an aggregate production function with constant skill-biased technical change; (ii) cohort qualities that vary with average years of schooling; and crucially (iii) time-invariant age-efficiency profiles. The model quantitatively accounts for changes in longitudinal and cross-sectional returns to experience, as well as the differential evolution of the college wage premium for young and old workers.

Suggested Citation

  • Hendricks Lutz, 2018. "Accounting for changing returns to experience," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-18, January.
    • Handle: RePEc:bpj:bejmac:v:18:y:2018:i:1:p:18:n:2
    DOI: 10.1515/bejm-2015-0201
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    More about this item

    Keywords

    returns to experience; college wage premium;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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