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Ben-Porath Meets Lazear: Microfoundations for Dynamic Skill Formation

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  • Costas Cavounidis
  • Kevin Lang

Abstract

We provide microfoundations for dynamic skill formation with a model of investment in multiple skills, when jobs place different weights on skills. We show that credit constraints may affect investment even when workers do not exhaust their credit. Firms may invest in their workers’ skills even when there are many similar competitors. Firm and worker incentives can lead to overinvestment. Optimal skill accumulation resembles—but is not—learning by doing. An example shows that shocks to skill productivity benefiting new workers but lowering one skill’s value may adversely affect even relatively young workers, and adjustment may be discontinuous in age.

Suggested Citation

  • Costas Cavounidis & Kevin Lang, 2020. "Ben-Porath Meets Lazear: Microfoundations for Dynamic Skill Formation," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1405-1435.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/705373
    DOI: 10.1086/705373
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    Cited by:

    1. Cäcilia Lipowski, 2024. "No Teens, No Tech: How Shortages of Young Workers Hinder Firm Technology Investments," CESifo Working Paper Series 11471, CESifo.
    2. Costas Cavounidis & Vittoria Dicandia & Kevin Lang & Raghav Malhotra, 2024. "The Nature of Technological Change 1960-2016," Working Papers 24-28, Federal Reserve Bank of Cleveland.
    3. Daniil Kashkarov, 2022. "RBTC and Human Capital: Accounting for Individual-Level Responses," CERGE-EI Working Papers wp721, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Ganguli, Ina & Haidar, Jamal Ibrahim & Khwaja, Asim Ijaz & Stemper, Samuel & Zafar, Basit, 2024. "Economic shocks and skill acquisition: Evidence from a national online learning platform at the onset of COVID-19," Labour Economics, Elsevier, vol. 90(C).
    5. Bachmann, Ronald & Gonschor, Myrielle & Lewandowski, Piotr & Madoń, Karol, 2024. "The impact of Robots on Labour market transitions in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 422-441.
    6. Albinowski, Maciej & Lewandowski, Piotr, 2024. "The impact of ICT and robots on labour market outcomes of demographic groups in Europe," Labour Economics, Elsevier, vol. 87(C).
    7. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.

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