The Experience Premium

Hyeok Jeong, Yong Kim () and Iourii Manovskii
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Yong Kim: Yonsei University

No 2011-21, Working Papers from Economic Research Institute, Bank of Korea

Abstract: We assess the role of supply, through the demographic changes of the workforce, in accounting for the large changes in the return to labor market experience over time. Using the PSID (1968-2007), we find that the movement of the return to experience is almost perfectly explained by demographic changes alone, with no role attributable to demand shifts. Moreover, these demographic changes account for the differential dynamics of the age premium across education groups emphasized by Katz and Murphy (1992), and account for the differential movements of the college premium across age groups emphasized by Card and Lemieux (2001). Thus, our analysis attributes a key role to demographic change in shaping several empirical regularities that are a focus of active research in macro and labor economics.

Keywords: Experience Premium; Return to Experience; Experience-labor Complementarity; Wage Dispersion; Consistent Aggregation (search for similar items in EconPapers)
JEL-codes: E24 E25 J24 J31 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2011-12-31
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