Experience vs. Obsolescence: A Vintage-Human-Capital Model

Kredler, Matthias (2008): Experience vs. Obsolescence: A Vintage-Human-Capital Model.

Abstract

I combine an infinite-horizon version of Ben-Porath’s (1967) model of human-capital accumulation with a vintage structure as in Chari & Hopenhayn (1991). Different skill levelsinside a vintage are complementary in production. Vintage-specific human capital is accumulated based on workers’ optimal strategies and is lost when the technology is phased out by an endogenous firm decision. I establish equivalence between competitive equilibrium and a planner’s problem. It is shown that returns to skill are highest in young vintages. Accelerated technological change shortens the life cycle of a technology and speeds up obsolescence; the premium on tenure rises because more workers are concentrated in young technologies with high skill premia. A calibration exercise comparing two steady states shows that the model quantitatively accounts for the changes in the experience premium, earnings dispersion and earnings turbulence in German data.

• Item Type: MPRA Paper
• Language: English
• Keywords: Vintage human capital, age-earnings profiles, partial differential equations
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; J - Labor and Demographic Economics > J0 - General > J01 - Labor Economics: General

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