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Business Cycle Fluctuations and the Life Cycle: How Important is On-The-Job Skill Accumulation?

  • Gary D. Hansen
  • Selo Imrohoroglu

We study the effects of on-the-job skill accumulation on average hours worked by age and the volatility of hours over the life cycle in a calibrated general equilibrium model. Two forms of skill accumulation are considered: learning by doing and on-the-job training. In our economy with learning by doing, individuals supply more labor early in the life cycle and less as they approach retirement than they do in an economy without this feature. The impact of this feature on the volatility of hours over the life cycle depends on the value of the intertemporal elasticity of labor supply. When individuals accumulate skills by on-the-job training, there are only weak effects on both the steady-state labor supply and its volatility over the life cycle.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13603.

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Date of creation: Nov 2007
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Publication status: published as Hansen, Gary D. & Imrohoroglu, Selahattin, 2009. "Business cycle fluctuations and the life cycle: How important is on-the-job skill accumulation?," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2293-2309, November.
Handle: RePEc:nbr:nberwo:13603
Note: EFG
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  1. Hansen, G D, 1993. "The Cyclical and Secular Behaviour of the Labour Input: Comparing Efficiency Units and Hours Worked," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 71-80, Jan.-Marc.
  2. Chang, Yongsung & Gomes, Joao F & Schorfheide, Frank, 2002. "Learning by Doing as a Propagation Mechanism," CEPR Discussion Papers 3599, C.E.P.R. Discussion Papers.
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  15. Rosen, Sherwin, 1976. "A Theory of Life Earnings," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S45-67, August.
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