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Ben-Porath Meets Lazear: Microfoundations for Dynamic Skill Formation

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  • Costas Cavounidis
  • Kevin Lang

Abstract

We provide microfoundations for dynamic skill formation with a model of investment in multiple skills, when jobs place different weights on skills. We show that credit constraints may affect investment even when workers do not exhaust their credit. Firms may invest in their workers’ skills even when there are many similar competitors. Firm and worker incentives can lead to overinvestment. Optimal skill accumulation resembles—but is not—learning by doing. An example shows that shocks to skill productivity benefiting new workers but lowering one skill’s value may adversely affect even relatively young workers, and adjustment may be discontinuous in age.

Suggested Citation

  • Costas Cavounidis & Kevin Lang, 2020. "Ben-Porath Meets Lazear: Microfoundations for Dynamic Skill Formation," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1405-1435.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/705373
    DOI: 10.1086/705373
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    Cited by:

    1. Daniil Kashkarov, 2022. "RBTC and Human Capital: Accounting for Individual-Level Responses," CERGE-EI Working Papers wp721, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.

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