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Schooling, learning on-the-job, earnings and inequality

  • Luis P. Correia

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    Why might people in poor countries leave school earlier and invest less in learning on-thejob than people in rich ones? How do these human capital decisions impact on inequality? To give quantitative answers to these questions, I build an overlapping generations model with optimal human capital accumulation and a given distribution of abilities. Variation in mortality and population growth rates can generate large variability in schooling decisions, earnings profiles and measures of inequality. High mortality and population growth rates are shown to produce comparatively little investment in human capital, flat earnings profiles and low inequality, both within and across cohorts.

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    File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp06585.pdf
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    Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 06/585.

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    Length: 42 pages
    Date of creation: May 2006
    Date of revision:
    Handle: RePEc:bri:uobdis:06/585
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    1. Alan B. Krueger & Jorn-Steffen Pischke, 1995. "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Chapters, in: Differences and Changes in Wage Structures, pages 405-446 National Bureau of Economic Research, Inc.
    2. Dupor, Bill, et al, 1996. "Some Effects of Taxes on Schooling and Training," American Economic Review, American Economic Association, vol. 86(2), pages 340-46, May.
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    8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    14. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
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    16. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
    17. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
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    19. McCabe, Peter J, 1983. "Optimal Leisure-Effort Choice with Endogenously Determined Earnings," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 308-29, July.
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