Optimal Consumption and Labor Choices with Learning-by-Doing

Posted: 29 Aug 2020

See all articles by Marina Di Giacinto

Marina Di Giacinto

University of Cassino

Francesco Ferrante

University of Cassino and Southern Lazio (UCLAM) - Department of Economics and Law

Date Written: May 18, 2020

Abstract

The net accumulation of human capital through the cultivation of cognitive and non-cognitive skills and knowledge, is an important source of change in professional and personal people’s life. Past work experience has a direct effect on wage levels and their growth; thus, it influences the achievable level of consumption and leisure and lifecycle wealth. This paper analyzes the relation between labor supply, consumption and human capital accumulation in a dynamic learning-by-doing setting. We model in a continuous time framework, the optimal control problem of a household that takes decisions on the level of consumption and labor supplied to maximize logarithmic utility from consumption and leisure subject to the constraints arising from inter-temporal accumulation of human and liquid wealth. We analyze an optimal learning-by-doing program in a deterministic framework, determine explicitly the optimal control policies and comment on their economic implications.

Keywords: Human capital, Learning-by-doing, Consumption, Labor supply, Dynamic programming

JEL Classification: C61, J24, J31.

Suggested Citation

Di Giacinto, Marina and Ferrante, Francesco, Optimal Consumption and Labor Choices with Learning-by-Doing (May 18, 2020). Available at SSRN: https://ssrn.com/abstract=3658612 or http://dx.doi.org/10.2139/ssrn.3658612

Marina Di Giacinto (Contact Author)

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy

Francesco Ferrante

University of Cassino and Southern Lazio (UCLAM) - Department of Economics and Law ( email )

Loc Folcara
Cassino, Frosinone 03043
Italy

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