Human Capital and Earnings Distribution Dynamics

Mark Huggett

Working Papers from Georgetown University, Department of Economics

Abstract: Earnings heterogeneity plays a crucial role in modern macroeconomics. We document that mean earnings and measures of earnings dispersion and skewness all increase in US data over most of the working life-cycle for a typical cohort as the cohort ages. We show that a human capital model can replicate these properties from the right distribution of initial human capital and learning ability, while producing the key properties of the cross-section distribution. We also show that learning ability differences are essential to produce the increase in earnings dispersion over the life cycle and that these differences account for the bulk of the variation in the present value of earnings across agents. These findings emphasize the need to further understand the role and origins of initial conditions in macro models.

Keywords: Precautionary wealth; earnigs risk; multi-period models (search for similar items in EconPapers)
JEL-codes: C60 D90 (search for similar items in EconPapers)
Date: 2003-03-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www8.georgetown.edu/departments/economics/pdf/310.pdf Full text (application/pdf)
None

Related works:
Journal Article: Human capital and earnings distribution dynamics (2006)
Working Paper: Human Capital and Earnings Distribution Dynamics (2002)
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:geo:guwopa:gueconwpa~03-03-10

Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
http://econ.georgetown.edu/

Access Statistics for this paper

More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Bibliographic data for series maintained by Marcia Suss ( this e-mail address is bad, please contact ).