EconPapers    
Economics at your fingertips  
 

Explaining cross-cohort differences in life-cycle earnings

Yu-Chien Kong (), B Ravikumar and G. Vandenbroucke

European Economic Review, 2018, vol. 107, issue C, 157-184

Abstract: College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively. Why are earnings profiles flatter for recent cohorts? We build a parsimonious model of schooling and human capital accumulation on the job, and calibrate it to earnings statistics of workers from the 1940 cohort. The model accounts for 99% of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts (52% for workers without a college education). The flattening in our model results from a single exogenous factor: the increasing price of skills. The higher skill price induces (i) higher college enrollment for recent cohorts and thus a change in the educational composition of workers and (ii) higher human capital at the start of work life for college-educated workers in the recent cohorts, which implies lower earnings growth over the life cycle.

Keywords: Life-cycle earnings; Flattening; Skill price; Education composition (search for similar items in EconPapers)
JEL-codes: E20 I26 J24 J31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292118300916
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Explaining Cross-Cohort Differences in Life Cycle Earnings (2016) Downloads
Working Paper: Explaining Cross-Cohort Di fferences in Life Cycle Earnings (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:107:y:2018:i:c:p:157-184

DOI: 10.1016/j.euroecorev.2018.06.005

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-05-26
Handle: RePEc:eee:eecrev:v:107:y:2018:i:c:p:157-184