No Pain, No Gain - An Experiment on Skill Accumulation

Bhagya N. Gunawardena, Lana Friesen () and Kenan Kalayci ()
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Bhagya N. Gunawardena: School of Economics, Finance and Marketing, RMIT University, Australia
Lana Friesen: School of Economics, The University of Queensland, Australia
Kenan Kalayci: School of Economics, The University of Queensland, Australia

No 670, Discussion Papers Series from University of Queensland, School of Economics

Abstract: Skill accumulation requires a periodic and persistent investment of time and effort. In contrast to financial investments, investing in skills does not allow for saving or borrowing, the maximum periodical investment is capped, and the cost of investment often decreases with the person’s cumulative past investment. In this paper, we develop a model that captures the key characteristics of a skill accumulation task where it is optimal to invest relatively high and increasing input levels in earlier periods. Using an online experiment we find that most participants invest too little compared to the rational path, and that a majority of the participants’ investments are characterized by myopic optimization. Whereas individual experience over repeated lifecycles improves investments and earnings, social information about a selected peer’s investments, earnings, or confidence levels has only a limited effect. Our results demonstrate the difficulty of investing in skill acquisition even in the absence of risk and time factors.

Keywords: skill accumulation; peer information; online experiment; lifecycle optimization; myopic optimization (search for similar items in EconPapers)
JEL-codes: D15 D83 J22 J24 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:670

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