Accounting for Changing Returns to Experience

30 Pages Posted: 14 Nov 2016 Last revised: 11 Jan 2018

See all articles by Lutz Hendricks

Lutz Hendricks

CESifo (Center for Economic Studies and Ifo Institute); UNC Chapel Hill

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

Hendricks, Lutz and Hendricks, Lutz, Accounting for Changing Returns to Experience (October 14, 2015). CFS Working Paper, No. 558, Available at SSRN: or

Lutz Hendricks (Contact Author)

UNC Chapel Hill ( email )

Chapel Hill, NC 27599
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

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