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A Model of Human Capital Formation and Contractual Unpredictability

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  • Nick Frazier

    (Rice University)

  • Flavio Cunha

    (Rice univesity)

Abstract

We study the effect of restricting the contracting space within a partial equilibrium environment. We develop a model of human capital accumulation where jobs have multiple characteristics including variability in hours and wages. We highlight the difficulties of using standard panel data to estimate and distinguish between worker preferences and the primitives of the offer function --- an issue with serious implications when comparing employee welfare. We propose using stated preferences data to trace out worker preferences over a variety of job attributes which we then take to the NLSY97 to recover the parameters underlying the distribution of job offers allowing for dependence on accumulated human capital. This approach provides a richer characterization of the process and permits us to quantify the effect of restricting the offer space on the labor force directly.

Suggested Citation

  • Nick Frazier & Flavio Cunha, 2016. "A Model of Human Capital Formation and Contractual Unpredictability," 2016 Meeting Papers 1204, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1204
    as

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    References listed on IDEAS

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