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The Acquisition of Skills over the Life-Cycle

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  • Stuart J. Fowler
  • Eric R. Young

Abstract

The cyclical behavior of the acquisition of skills over the life-cycle is investigated. The OLG model employed includes the human capital production sector of Heckman (1976) that has two possible responses in skill acquisition to a productivity shock; a substitution and an income effect. The calibrated model predicts, for all age groups, that the substitution effect dominates the income effect implying opportunity-cost considerations tend to make schooling countercyclical. However, the data on college enrollments suggests that the ability-to-pay consideration, or the income effect, is more important for the very young since enrollments for the recently graduated from high-school are procyclical. By making human capital acquisition shocks positively correlated with the TFP shock, the income effect of the young is increased thereby replicating the observed data.

Suggested Citation

  • Stuart J. Fowler & Eric R. Young, 2004. "The Acquisition of Skills over the Life-Cycle," Working Papers 200402, Middle Tennessee State University, Department of Economics and Finance.
    • Handle: RePEc:mts:wpaper:200402
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    Cited by:

    1. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 435-452, September.
    2. Accolley, Delali, 2015. "Altruistic Overlapping Generations of Households and the Contribution of Human Capital to Economic Growth," MPRA Paper 69972, University Library of Munich, Germany.

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    More about this item

    Keywords

    Human Capital; OLG; Perturbation;
    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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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