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The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Schwartzman, Felipe / Wang, Pengfei

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Accounting for changing returns to experience

Lutz Hendricks
Published Online: 2017-07-05 | DOI: https://doi.org/10.1515/bejm-2015-0201


Returns to experience for U.S. workers have changed over the post-war period. This paper argues that a simple model goes a long way towards replicating these changes. The model features three well-known ingredients: (i) an aggregate production function with constant skill-biased technical change; (ii) cohort qualities that vary with average years of schooling; and crucially (iii) time-invariant age-efficiency profiles. The model quantitatively accounts for changes in longitudinal and cross-sectional returns to experience, as well as the differential evolution of the college wage premium for young and old workers.

Keywords: returns to experience; college wage premium

JEL Classification: E24 - wages, aggregate human capital; I26 - returns to education; J31 - wage level and structure


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About the article

Published Online: 2017-07-05

Citation Information: The B.E. Journal of Macroeconomics, Volume 18, Issue 1, 20150201, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2015-0201.

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