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Understanding Wage Growth: Estimating and Testing Learning-by-Doing

Philippe Belley

Journal of Human Capital, 2017, vol. 11, issue 2, 213 - 246

Abstract: I adapt the basic insight from the literature that tests the permanent-income theory to test the learning-by-doing (LBD) model of human capital accumulation. I propose three measures of workers’ incentives to accumulate skills. These incentives correlate with wage growth conditional on hours worked and past wages, implying that significant components of wage growth are not accounted for by the LBD model. This suggests that wage growth is costly and that workers face a trade-off between current and future earnings. This trade-off has ramifications for wage subsidy policies and for understanding women’s decisions about children and career.

Date: 2017
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