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Labor Market Frictions, Human Capital Accumulation, and Consumption Inequality

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  • Michael Graber

    (UCL)

  • Jeremy Lise

    (University College London)

Abstract

We develop a frictional model of the labor market with stochastic human capital accumulation and incomplete markets. The stochastic process for human capital may be heterogeneous across workers as well as depend on the firm type where the worker is employed. We establish nonparametric identification of the model, and estimate it using matched employer-employee data from Germany. We provide a decomposition of lifecycle inequality in earnings and consumption resulting from heterogeneity in ability, heterogeneity in the rate of human capital accumulation, search frictions (the random allocation of similar workers to different jobs) and the interaction of human capital and search friction (a worker’s history of job opportunities may differentially affect her human capital accumulation opportunities).

Suggested Citation

  • Michael Graber & Jeremy Lise, 2016. "Labor Market Frictions, Human Capital Accumulation, and Consumption Inequality," 2016 Meeting Papers 136, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:136
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    Cited by:

    1. Mariacristina De Nardi & Giulio Fella & Gonzalo Paz Pardo, 2016. "The Implications of Richer Earnings Dynamics for Consumption and Wealth," NBER Working Papers 21917, National Bureau of Economic Research, Inc.
    2. De Nardi, Mariacristina & Fella, Giulio & Knoef, Marike & Paz-Pardo, Gonzalo & Van Ooijen, Raun, 2021. "Family and government insurance: Wage, earnings, and income risks in the Netherlands and the U.S," Journal of Public Economics, Elsevier, vol. 193(C).
    3. Benjamin Griffy, 2018. "Borrowing Constraints, Search, and Life-Cycle Inequality," Discussion Papers 18-01, University at Albany, SUNY, Department of Economics.
    4. Mariacristina De Nardi & Giulio Fella & Gonzalo Paz-Pardo, 2020. "Nonlinear Household Earnings Dynamics, Self-Insurance, and Welfare," Journal of the European Economic Association, European Economic Association, vol. 18(2), pages 890-926.

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