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The Business Cycle Human Capital Accumulation Nexus and its Effect on Labor Supply Volatility

Author

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  • Diana Alessandrini

    (Department of Economics and finance, University of Guelph, Canada)

  • Stephen Kosempel

    (Department of Economics and finance, University of Guelph, Canada)

  • Thanasis Stengos

    (Department of Economics and finance, University of Guelph, Canada)

Abstract

This paper studies the cyclicality of human capital accumulation by using a lifecycle RBC model with two types of heterogeneity: age and productivity in learning. Results show that individuals invest more in human capital during economic downturns. In particular, schooling acts as a buffer sector and allows agents to compensate for the shock by accumulating more human capital. However, human capital accumulation is more countercyclical for young and low-productivity individuals because they face lower opportunity costs of education and a higher marginal product of human capital. These results are confirmed empirically using US data from the Current Population Survey.

Suggested Citation

  • Diana Alessandrini & Stephen Kosempel & Thanasis Stengos, 2012. "The Business Cycle Human Capital Accumulation Nexus and its Effect on Labor Supply Volatility," Working Paper series 62_12, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:62_12
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    Cited by:

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    2. Sara Ayllón & Natalia Nollenberger, 2021. "The Unequal Opportunity For Skills Acquisition During The Great Recession In Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 289-316, June.
    3. Fraser Summerfield & Ioannis Theodossiou, 2017. "The Effects Of Macroeconomic Conditions At Graduation On Overeducation," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1370-1387, July.
    4. Diana Alessandrini, 2021. "Progressive Taxation and Economic Stability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 422-452, April.
    5. Aleksandar Vasilev, 2023. "A real-business-cycle model with human capital accumulation: lessons for Bulgaria (1999-2018)," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 16(1), pages 80-94, January.
    6. Bonacini, Luca, 2020. "Unequal effects of the economic cycle on human capital investment. Evidence from Italian panel data," GLO Discussion Paper Series 733, Global Labor Organization (GLO).
    7. Tselmuun Tserenkhuu & Stephen Kosempel, 2024. "Life expectancy and business cycles in a small open economy," ISER Discussion Paper 1263, Institute of Social and Economic Research, Osaka University.
    8. Sadaba, Barbara & Vujić, Sunčica & Maier, Sofia, 2024. "Characterizing the schooling cycle," Economic Modelling, Elsevier, vol. 132(C).
    9. Anneleen Vandeplas & Anna Thum-Thysen, 2019. "Skills Mismatch and Productivity in the EU," European Economy - Discussion Papers 100, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    10. Bertoni Marco & Brunello Giorgio, 2022. "Training during recessions: recent European evidence," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-17, January.
    11. Diana Alessandrini & Stephen Kosempel & Alessandra Pelloni & Thanasis Stengos, 2016. "Earnings inequality, the business cycle, and the life cycle," Working Papers 1602, University of Guelph, Department of Economics and Finance.
    12. Franziska Hampf & Marc Piopiunik & Simon Wiederhold, 2020. "The Effects of Graduating from High School in a Recession: College Investments, Skill Formation, and Labor-Market Outcomes," CESifo Working Paper Series 8252, CESifo.

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    More about this item

    Keywords

    human capital accumulation; business cycles; labor supply;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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