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Bookworms versus Party Animals: An Artificial Labor Market with Human and Social Capital Accumulation

Author

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  • Dan Farhat

    (Department of Economics, University of Otago)

Abstract

Data show that educated workers earn higher wages and experience lower unemployment rates. Some researchers believe this occurs because education improves a worker's productivity (or human capital), making them more desirable on the job market. Other researchers believe schooling improves a worker's network (or social capital), giving them more information about lucrative openings and more resources to secure a job (such as references from peers). Much of the research on human and social capital focuses on why schooling benefits workers, but often overlooks how education produces these outcomes. This paper develops an agent-based complex adaptive system that features human and social capital accumulation, formal schooling and on-the-job training, labor market search and durable employment contracts to explain the process linking education to labor market outcomes and economic performance. Sample simulations show that human capital accumulation explains many of the novel facts seen in the data while social capital alone is not enough.

Suggested Citation

  • Dan Farhat, 2011. "Bookworms versus Party Animals: An Artificial Labor Market with Human and Social Capital Accumulation," Working Papers 1103, University of Otago, Department of Economics, revised May 2011.
    • Handle: RePEc:otg:wpaper:1103
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    References listed on IDEAS

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    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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