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Title: The Price of Experience

Citation Type: Miscellaneous

Publication Year: 2008

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Abstract: We propose and estimate a model in which changes in the demographic composition of the labor force may affect the returns to labor market experience. We consider workersas providing two distinct productive services physical effort, or labor, and services of the skill accumulated with labor market experience, or experience. The key element in the model is the aggregate production function that allows for complementarity between the appropriately measured aggregate stocks of labor and experience. The parameters of the aggregate technology are identified by estimating individual earnings equations that consistently aggregate. Both time-series and cross-sectional data confirm strong experience-labor complementarity. We find that the observed demographic changes that drive the aggregate experience to labor ratio account nearly perfectly for the substantial changes in the experience premium over time.

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Authors: Manovskii, Iourii; Kim, Yong; Jeong, Hyeok

Publisher: Pennsylvania State University

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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