A Framework for Analyzing the Impact of Cohort Size on Education and Labor Earning
The paper analyzes three models of labor demand solving for the change in wages of a given labor group due to a change in the size of a birth cohort. When the production function includes age-schooling groups as separate factors, an increase in the size of one birth cohort changes the size of several labor market groups. Also, in this case, the demand effect of changing factor size is joined by a supply effect of changing schooling proportions. Ignoring the supply effect may cause us to overestimate the effect of a large birth cohort on wages of young skilled workers.