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Post-Schooling Human Capital Investments and the Life Cycle of Earnings

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  • Thierry Magnac
  • Nicolas Pistolesi
  • Sébastien Roux

Abstract

We propose an original model of human capital investments after leaving school in which individuals differ in their initial human capital obtained at school, their rates of return and costs of human capital investments, and their terminal values of human capital at an arbitrary date in the future. We derive a tractable reduced-form Mincerian model of log earnings profiles along the life cycle that is written as a linear factor model in which levels, growth, and curvature of earnings profiles are individual specific. This provides a structural interpretation of results obtained in the empirical literature on the dynamics of earnings and acknowledges its limitations.

Suggested Citation

  • Thierry Magnac & Nicolas Pistolesi & Sébastien Roux, 2018. "Post-Schooling Human Capital Investments and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 126(3), pages 1219-1249.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/697206
    DOI: 10.1086/697206
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    Cited by:

    1. Magnac, Thierry & Roux, Sébastien, 2021. "Heterogeneity and wage inequalities over the life cycle," European Economic Review, Elsevier, vol. 134(C).
    2. Thierry Magnac, 2024. "Human Capital and Search Models: A Happy Match," Revue économique, Presses de Sciences-Po, vol. 75(1), pages 11-29.
    3. Rakhman, Fuad & Wijayana, Singgih, 2024. "Human development and the quality of financial reporting among the local governments in Indonesia," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 56(C).
    4. Argan, Damiano & Gary-Bobo, Robert & Goussé, Marion, 2023. "Is there a devaluation of degrees ? Unobserved heterogeneity in returns to education and early experience," CEPREMAP Working Papers (Docweb) 2304, CEPREMAP.
    5. Bussink, Henri & ter Weel, Bas, 2023. "Costs and benefits of an individual learning account (ILA): A simulation analysis for the Netherlands," Economic Modelling, Elsevier, vol. 118(C).
    6. Jin Seo Cho & Peter C. B. Phillips & Juwon Seo, 2019. "Parametric Inference on the Mean of Functional Data Applied to Lifetime Income Curves," Working papers 2019rwp-153, Yonsei University, Yonsei Economics Research Institute.
    7. Davide Dragone & Paolo Vanin, 2022. "Substitution Effects in Intertemporal Problems," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 791-809, August.
    8. Akira Momota, 2022. "Long lifespan and optimal recurrent education," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 1193-1222, May.
    9. Jin Seo Cho & Peter C. B. Phillips & Juwon Seo, 2022. "Parametric Conditional Mean Inference With Functional Data Applied To Lifetime Income Curves," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 391-456, February.
    10. Bussink, Henri & ter Weel, Bas, 2022. "Costs and Benefits of an Individual Learning Account (ILA): A Simulation Analysis for the Netherlands," IZA Discussion Papers 15649, Institute of Labor Economics (IZA).
    11. Pora, Pierre & Wilner, Lionel, 2020. "A decomposition of labor earnings growth: Recovering Gaussianity?," Labour Economics, Elsevier, vol. 63(C).
    12. Jin Seo Cho & Peter C. B. Phillips & Juwon Seo, 2023. "Functional Data Inference in a Parametric Quantile Model applied to Lifetime Income Curves," Working papers 2023rwp-211, Yonsei University, Yonsei Economics Research Institute.
    13. Joseph Altonji & Disa Hynsjo & Ivan Vidangos, 2023. "Individual Earnings and Family Income: Dynamics and Distribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 225-250, July.
    14. Paul Bingley & Lorenzo Cappellari, 2022. "Earnings Dynamics, Inequality and Firm Heterogeneity," LISER Working Paper Series 2022-07, Luxembourg Institute of Socio-Economic Research (LISER).

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