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Experience vs. obsolescence: A vintage-human-capital model

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  • Kredler, Matthias

Abstract

I introduce endogenous human-capital accumulation into an infinite-horizon version of Chari and Hopenhaynʼs (1991) [4] vintage-human-capital model. Returns to skill and tenure premia are highest in young vintages, where skill is scarcest and agents accumulate human capital fastest. As the vintage ages, the skill premium decreases and vanishes entirely upon vintage death. Workers run through cycles of human-capital accumulation: their wages rise as they accumulate skill, undergo downward pressure as the technology ages, and finally drop sharply when the worker switches to a new technology. The results are in line with German linked employer–employee data: tenure premia are highest in young establishments, as well as in fast-growing industries, occupations and establishments. A calibration exercise suggests that human-capital accumulation is the most important determinant of workersʼ wage profiles, whereas changes to the price of skill and vintage productivity gains play a smaller quantitative role.

Suggested Citation

  • Kredler, Matthias, 2014. "Experience vs. obsolescence: A vintage-human-capital model," Journal of Economic Theory, Elsevier, vol. 150(C), pages 709-739.
  • Handle: RePEc:eee:jetheo:v:150:y:2014:i:c:p:709-739
    DOI: 10.1016/j.jet.2013.08.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Vintage human capital; Tenure-wage profiles;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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