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

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  • Gary D. Hansen
  • Selo Imrohoroglu

Abstract

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.

Suggested Citation

  • Gary D. Hansen & Selo Imrohoroglu, 2007. "Business Cycle Fluctuations and the Life Cycle: How Important is On-The-Job Skill Accumulation?," NBER Working Papers 13603, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13603
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    References listed on IDEAS

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    Cited by:

    1. Chen, Been-Lon & Lu, Chia-Hui, 2013. "Optimal factor tax incidence in two-sector human capital-based models," Journal of Public Economics, Elsevier, vol. 97(C), pages 75-94.
    2. Adam Blandin, 2015. "Disciplining the Human Capital Model: Learning By Doing, Ben-Porath, and Policy Analysis," 2015 Meeting Papers 1147, Society for Economic Dynamics.
    3. Cassou, Steven P. & Gorostiaga, Arantza & Uribe-Zubiaga, Iker, 2013. "Policy effects of the elasticity of substitution across labor types in life cycle models," Economic Modelling, Elsevier, vol. 35(C), pages 59-70.
    4. Chia-Hui Lu & Been-Lon Chen, 2015. "Optimal Capital Taxation in a Neoclassical Growth Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(2), pages 257-269, April.
    5. Nir Jaimovich & Seth Pruitt & Henry E. Siu, 2009. "The demand for youth: implications for the hours volatility puzzle," International Finance Discussion Papers 964, Board of Governors of the Federal Reserve System (U.S.).
    6. Giuseppe Fiori & Domenico Ferraro, 2016. "Aging of the Baby Boomers: Demographics and Propagation of Tax Shocks," 2016 Meeting Papers 359, Society for Economic Dynamics.
    7. Audra J. Bowlus & Chris Robinson, 2012. "Human Capital Prices, Productivity, and Growth," American Economic Review, American Economic Association, vol. 102(7), pages 3483-3515, December.
    8. Alessandrini, Diana & Kosempel, Stephen & Stengos, Thanasis, 2015. "The business cycle human capital accumulation nexus and its effect on hours worked volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 356-377.
    9. Xin Xu & Robert Kaestner, 2010. "The Business Cycle and Health Behaviors," NBER Working Papers 15737, National Bureau of Economic Research, Inc.
    10. Ohanian, Lee E. & Prescott, Edward C. & Stokey, Nancy L., 2009. "Introduction to dynamic general equilibrium," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2235-2246, November.
    11. Nancy L. Stokey, 2018. "Technology and Skill: Twin Engines of Growth," NBER Working Papers 24570, National Bureau of Economic Research, Inc.
    12. Xu, Xin, 2013. "The business cycle and health behaviors," Social Science & Medicine, Elsevier, vol. 77(C), pages 126-136.
    13. repec:eee:ecmode:v:68:y:2018:i:c:p:425-434 is not listed on IDEAS
    14. Diana Alessandrini & Stephen Kosempel & Alessandra Pelloni & Thanasis Stengos, 2016. "Earnings inequality, the business cycle, and the life cycle," Working Papers 1602, University of Guelph, Department of Economics and Finance.
    15. Lu, Chia-Hui, 2015. "Fiscal policies, frictional labor market, and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 315-327.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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