 Movin on up: interpreting the earnings experience profileLSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library Abstract: Human capital theory provides the generally accepted interpretation of the relationship between earnings and labour market experience, namely that general human capital tends to increase with experience. However, there are other plausible interpretations e.g. search models generally predict that more time in the labour market increases the chance of finding a better match and hence tends to be associated with higher earnings. In this paper we show how a simple search model can be used to predict the amount of earnings growth that can be assigned to search with the residual being assigned to the human capital model. We show how a substantial if not the larger part of the rise in earnings over the life-cycle in Britain can be explained by a simple search model and that virtually all the earnings gap between men and women can be explained in this way. Overall, the evidence suggests that we do need to rethink our interpretation of the returns to experience in earnings functions. JEL-codes: J01 R14 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:20294 Access Statistics for this paper More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC. |
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