Full Citation
Title: Directed Technical Change: a Macro Perspective on Life Cycle Earnings Profiles
Citation Type: Working Paper
Publication Year: 2017
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Abstract: Economists have observed that growth of workers wages and earnings is rapid early in their careers and then slows and often becomes negative as they near the ends of their careers. We propose a new macroeconomic mechanism for generating concavity in the age-earnings profile based on Daron Acemoglus theory of Directed Technical Change. The mechanism does not depend on changes in the human capital of the individual as proposed by Ben-Porath and Mincer; rather changes in the relative human capital of age cohorts affect the profitability of age-specific technologies, biasing innovation toward improving the productivity of younger workers. Using new data from Tamura, Dwyer, Devereux and Baier, we estimate that on average a worker at the beginning of the career can expect a yearly wage increase of 6.2% while a worker at the end of a career with 40 years of experience can can expect a yearly wage increase of 2.1%. The theory generates maximal earnings at a later age than observed, so it must be taken as supplemental torather than replacinghuman capital-based theories of age-earnings profiles.
Url: https://mpra.ub.uni-muenchen.de/81830/1/MPRA_paper_81830.pdf
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Authors: Cragun, Randy; Tamura, Robert; Jerzmanowski, Michal
Series Title: MPRA Working Paper
Publication Number: 81830
Institution: Clemson University
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Data Collections: IPUMS USA
Topics: Methodology and Data Collection, Other
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