IDEAS home Printed from https://ideas.repec.org/p/red/sed004/218.html
   My bibliography  Save this paper

Technological Change in the Production of Human Capital: Implications for Human Capital Stocks, Wages and Skill Differentials

Author

Listed:
  • Chris Robinson
  • Audra J. Bowlus

Abstract

In this paper we explicitly model and estimate an education system that produces human capital. An important innovation is that technological change in the production functions associated with any level of education is permitted and the rate of change may be different at different levels and for different countries. Technological change is taken for granted for almost all other production functions, yet in most discussions of human capital including the current debate over widening skill differentials, it plays no role. It is rarely even discussed. The approach taken here is in the same spirit as recent work on estimating a true price series for computers based on an underlying constant standard of computations per second. An important part of the work is the choice of this standard for human capital. Individuals take the education system as given and choose paths of human capital investment to maximize lifetime wealth. The endogenous nature of human capital investment makes the human capital associated with any observed characteristic, such as years of schooling, reflective of selection effects as well as technological change effects. In this framework, an efficiency units model of human capital, amended to include technical change as well as selection, is consistent with the basic pattern of wages in the United States in the last three decades. New series on the human capital input (efficiency units) and the price of this input for 1976-2001 are computed, based on a cohort analysis that incorporates technical change and selection. The price series show s a substantial secular decline to the early 1990's followed by an increase to 2001. The efficiency units series include a breakdown by a variety of characteristics, including observed years of schooling. Together with the price series this determines a time path for any wage differential by any observed measures such as college attendance. A natural consequence of this framework is that changes in differentials such as that between college and high school will be cohort determined without reference to relative supplies. This is consistent with the recent evidence on this widening differential - that it is largely confined to recent cohorts.

Suggested Citation

  • Chris Robinson & Audra J. Bowlus, 2004. "Technological Change in the Production of Human Capital: Implications for Human Capital Stocks, Wages and Skill Differentials," 2004 Meeting Papers 218, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:218
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard Blundell & Howard Reed & Thomas M. Stoker, 2003. "Interpreting Aggregate Wage Growth: The Role of Labor Market Participation," American Economic Review, American Economic Association, vol. 93(4), pages 1114-1131, September.
    2. Hanushek, Eric A & Rivkin, Steven G & Taylor, Lori L, 1996. "Aggregation and the Estimated Effects of School Resources," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 611-627, November.
    3. 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.
    4. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    5. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 1-25.
    6. Lorraine Dearden & Javier Ferri & Costas Meghir, 2002. "The Effect Of School Quality On Educational Attainment And Wages," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 1-20, February.
    7. Card, David & Lemieux, Thomas, 1996. "Wage dispersion, returns to skill, and black-white wage differentials," Journal of Econometrics, Elsevier, vol. 74(2), pages 319-361, October.
    8. Audra Bowlus & Haoming Liu & Chris Robinson, 2002. "Business Cycle Models, Aggregation, and Real Wage Cyclicality," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 308-335, Part.
    9. Jaeger, David A, 1997. "Reconciling the Old and New Census Bureau Education Questions: Recommendations for Researchers," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 300-309, July.
    10. Hanushek, Eric A, 1986. "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1141-1177, September.
    11. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    12. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
    13. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    14. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
    15. 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(4), pages 352-352.
    16. Finn E. Kydland & Edward C. Prescott, 1993. "Cyclical movements of the labor input and its implicit real wage," Economic Review, Federal Reserve Bank of Cleveland, vol. 29(Q II), pages 12-23.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andren, Daniela & Earle, John S. & Sapatoru, Dana, 2005. "The wage effects of schooling under socialism and in transition: Evidence from Romania, 1950-2000," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 300-323, June.
    2. Audra J. Bowlus & Chris Robinson, 2005. "The Contribution of Post-Secondary Education to Human Capital Stocks in Canada and the United States," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20051, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    3. Audra J. Bowlus & Haoming Liu & Chris Robinson, 2005. "Human Capital, Productivity and Growth," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20052, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Audra J. Bowlus & Haoming Liu & Chris Robinson, 2005. "Human Capital, Productivity and Growth," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20052, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    2. Jin Song & Terry Sicular & Bjorn Gustafsson, 2017. "China's Urban Gender Wage Gap: A New Direction?," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201723, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    3. 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.
    4. Xinxin Ma & Shi Li, 2017. "The Effects of Minimum Wage on Wage Distribution in Urban China: Evidence from the CHIP Data," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201724, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    5. Diego Restuccia & Guillaume Vandenbroucke, 2013. "The Evolution Of Education: A Macroeconomic Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 915-936, August.
    6. Paul J. Devereux, 2004. "Cyclical Quality Adjustment in the Labor Market," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 600-615, January.
    7. He, Hui, 2012. "What drives the skill premium: Technological change or demographic variation?," European Economic Review, Elsevier, vol. 56(8), pages 1546-1572.
    8. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 7, pages 307-458, Elsevier.
    9. Rui Castro & Daniele Coen-Pirani, 2008. "WHY HAVE AGGREGATE SKILLED HOURS BECOME SO CYCLICAL SINCE THE MID-1980s?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 135-185, February.
    10. Michael W. L. Elsby & Donggyun Shin & Gary Solon, 2016. "Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 249-291.
    11. Fatih Guvenen & Burhanettin Kuruscu, 2010. "A Quantitative Analysis of the Evolution of the US Wage Distribution, 1970–2000," NBER Chapters, in: NBER Macroeconomics Annual 2009, Volume 24, pages 227-276, National Bureau of Economic Research, Inc.
    12. Manuel Arellano & Stéphane Bonhomme, 2017. "Quantile Selection Models With an Application to Understanding Changes in Wage Inequality," Econometrica, Econometric Society, vol. 85, pages 1-28, January.
    13. Jean-Marc Robin & Costas Meghir & Christian Dustmann & Jerome Adda, 2013. "Career Progression, Economic Downturns, and Skills," 2013 Meeting Papers 993, Society for Economic Dynamics.
    14. Kong, Y.-C. & Ravikumar, B. & Vandenbroucke, G., 2018. "Explaining cross-cohort differences in life-cycle earnings," European Economic Review, Elsevier, vol. 107(C), pages 157-184.
    15. Thijs van Rens & Almut Balleer, 2007. "Cyclical Skill-Biased Technological Change," 2007 Meeting Papers 62, Society for Economic Dynamics.
    16. Audra Bowlus & Lance Lochner & Chris Robinson & Eda Suleymanoglu, 2023. "Wages, Skills, and Skill-Biased Technical Change: The Canonical Model Revisited," Journal of Human Resources, University of Wisconsin Press, vol. 58(6), pages 1783-1819.
    17. Sungbae An & Yongsung Chang & Sun-Bin Kim, 2009. "Can a Representative-Agent Model Represent a Heterogeneous-Agent Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 29-54, July.
    18. Hui He & Zheng Liu, 2008. "Investment-Specific Technological Change, Skill Accumulation, and Wage Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 314-334, April.
    19. Cyrus Farsian, 2011. "The Fallacy of Composition Bias in the RealWage Cyclicality Puzzle," Studies in Economics 1116, School of Economics, University of Kent.
    20. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2006. "The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates," NBER Working Papers 12159, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    human capital; education; skill differentials;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed004:218. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.