Accounting for Changing Returns to Experience
30 Pages Posted: 14 Nov 2016 Last revised: 11 Jan 2018
Date Written: October 14, 2015
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, I26, J31
Suggested Citation: Suggested Citation