The Acquisition of Skills over the Life-Cycle

Stuart Fowler () and Eric Young

No 200402, Working Papers from Middle Tennessee State University, Department of Economics and Finance

Abstract: The cyclical behavior of the acquisition of skills over the life-cycle is investigated. The OLG model employed includes the human capital production sector of Heckman (1976) that has two possible responses in skill acquisition to a productivity shock; a substitution and an income effect. The calibrated model predicts, for all age groups, that the substitution effect dominates the income effect implying opportunity-cost considerations tend to make schooling countercyclical. However, the data on college enrollments suggests that the ability-to-pay consideration, or the income effect, is more important for the very young since enrollments for the recently graduated from high-school are procyclical. By making human capital acquisition shocks positively correlated with the TFP shock, the income effect of the young is increased thereby replicating the observed data.

Keywords: Human Capital; OLG; Perturbation (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 (search for similar items in EconPapers)
Date: 2004-04
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mts:wpaper:200402

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