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Human Capital Accumulation and the Intertemporal Elasticity of Substitution of Labor: How Large is the Bias?

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  • Johanna Wallenius

    (Stockholm School of Economics)

Abstract

I consider two different skill accumulation technologies, learning by doing and Ben-Porath type training. The effect of human capital accumulation in the form of learning by doing is to increase the labor supply elasticity estimate by a factor of 2.1 relative to the estimate that ignores human capital accumulation. The results are similar for the Ben Porath type training technology, although the estimate of the bias is somewhat higher. (Copyright: Elsevier)

Suggested Citation

  • Johanna Wallenius, 2011. "Human Capital Accumulation and the Intertemporal Elasticity of Substitution of Labor: How Large is the Bias?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 577-591, October.
  • Handle: RePEc:red:issued:10-106
    DOI: 10.1016/j.red.2011.06.002
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    Cited by:

    1. Peterman, William B., 2013. "Determining the motives for a positive optimal tax on capital," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 265-295.
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    3. Ellen R. McGrattan & Edward C. Prescott, 2017. "On financing retirement with an aging population," Quantitative Economics, Econometric Society, vol. 8(1), pages 75-115, March.
    4. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2016. "Consumption Inequality and Family Labor Supply," American Economic Review, American Economic Association, vol. 106(2), pages 387-435, February.
    5. Orazio Attanasio & Peter Levell & Hamish Low & Virginia Sánchez-Marcos, 2015. "Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply," NBER Working Papers 21315, National Bureau of Economic Research, Inc.
    6. Alejandro Badel & Mark Huggett & Wenlan Luo, 2020. "Taxing Top Earners: a Human Capital Perspective," Economic Journal, Royal Economic Society, vol. 130(629), pages 1200-1225.
    7. Rupert, Peter & Zanella, Giulio, 2015. "Revisiting wage, earnings, and hours profiles," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 114-130.
    8. Eric French & John Jones, 2012. "Public pensions and labor supply over the life cycle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 268-287, April.
    9. Groneck, Max & Wallenius, Johanna, 2017. "It Sucks to Be Single! Marital Status and Redistribution of Social Security," SSE Working Paper Series in Economics 2017:1, Stockholm School of Economics.
    10. Michael P. Keane & Nada Wasi, 2016. "Labour Supply: The Roles of Human Capital and The Extensive Margin," Economic Journal, Royal Economic Society, vol. 0(592), pages 578-617, May.
    11. Edward C. Prescott & Johanna Wallenius, 2012. "Aggregate labor supply," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 35(Oct).
    12. Riccardo Fiorito & Giulio Zanella, 2012. "The Anatomy of the Aggregate Labor Supply Elasticity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 171-187, April.
    13. Menoncin, Francesco & Regis, Luca, 2020. "Optimal life-cycle labour supply, consumption, and investment: The role of longevity-linked assets," Journal of Banking & Finance, Elsevier, vol. 120(C).
    14. Bandyopadhyay, Debasis & King, Ian & Tang, Xueli, 2019. "Human capital misallocation, redistributive policies, and TFP," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 309-324.
    15. Rogerson, Richard & Wallenius, Johanna, 2016. "Retirement, home production and labor supply elasticities," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 23-34.
    16. Blandin, Adam & Peterman, William B., 2019. "Taxing capital? The importance of how human capital is accumulated," European Economic Review, Elsevier, vol. 119(C), pages 482-508.
    17. Marek Kapicka, 2015. "Pareto Efficient Taxation with Learning by Doing," 2015 Meeting Papers 619, Society for Economic Dynamics.
    18. Yang, Mian & Fan, Ying & Yang, Fuxia & Hu, Hui, 2014. "Regional disparities in carbon dioxide reduction from China's uniform carbon tax: A perspective on interfactor/interfuel substitution," Energy, Elsevier, vol. 74(C), pages 131-139.
    19. Antonio Cutanda & Juan A. Sanchis Llopis, 2019. "Intertemporal substitution for consumption and leisure: empirical evidence for Spain," Working Papers 1909, Department of Applied Economics II, Universidad de Valencia.
    20. Michael Nwogugu, 2020. "Regret Theory And Asset Pricing Anomalies In Incomplete Markets With Dynamic Un-Aggregated Preferences," Papers 2005.01709, arXiv.org.
    21. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    22. Blandin, Adam, 2018. "Learning by Doing and Ben-Porath: Life-cycle Predictions and Policy Implications," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 220-235.
    23. Vogel, Edgar, 2014. "Optimal level of government debt - matching wealth inequality and the fiscal sector," Working Paper Series 1665, European Central Bank.
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    More about this item

    Keywords

    Intertemporal elasticity of substitution; Human capital; Life cycle; Labor supply;
    All these keywords.

    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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