Personal Increasing Returns: Analytics and Applications

27 Pages Posted: 18 Mar 2022

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

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Date Written: March 15, 2022

Abstract

The human capital investment model with endogenous labor supply is generalized to consumer and health behaviors while retaining the tractability of comparative-static analysis of a single first-order condition. Accounting for the endogenous specialization responses is essential to properly distinguish supply and demand factors and to understand how the magnitude of their effects vary across time and circumstances. Even signing effects of policy interventions can hinge on the existence and extent of personal increasing returns. Applications include the gender gap in earnings, the dynamics of substance abuse, effects of taxes on human capital, the tradeoff between product quality and quantity, and unintended consequences of energy regulation. Metrics are provided for assessing the extent of personal increasing returns.

JEL Classification: D11,I12,J24

Suggested Citation

Mulligan, Casey B., Personal Increasing Returns: Analytics and Applications (March 15, 2022). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2022-38, Available at SSRN: https://ssrn.com/abstract=4060265 or http://dx.doi.org/10.2139/ssrn.4060265

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