Why are Life-Cycle Earnings Profiles Getting Flatter?

14 Pages Posted: 6 Jul 2017 Last revised: 17 Jul 2019

See all articles by B. Ravikumar

B. Ravikumar

Federal Reserve Bank of Saint Louis

Guillaume Vandenbroucke

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: 2017

Abstract

The authors present a simple, two-period model of human capital accumulation on the job and through college attainment. They use a calibrated version of the model to explain the observed flattening of the life-cycle earnings profiles of two cohorts of workers. The model accounts for more than 55 percent of the observed flattening for high school-educated and for college-educated workers. Two channels generate the flattening in the model: selection (or higher college attainment) and a higher skill price for the more recent cohort. Absent selection, the model would have accounted for no flattening for high school-educated workers and about 23 percent of the observed flattening for college-educated workers.

JEL Classification: E20, I26, J24, J31

Suggested Citation

Ravikumar, B. and Vandenbroucke, Guillaume, Why are Life-Cycle Earnings Profiles Getting Flatter? (2017). Review, Vol. 99, Issue 3, pp. 245-57, 2017. Available at SSRN: https://ssrn.com/abstract=2997939 or http://dx.doi.org/10.20955/r.2017.245-257

B. Ravikumar (Contact Author)

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Guillaume Vandenbroucke

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States
+1 314 444 8717 (Phone)

HOME PAGE: http://www.guillaumevdb.net/

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