Full Citation

Title: Explaining Cross-Cohort Differences in Life-cycle Earnings

Citation Type: Journal Article

Publication Year: 2018

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DOI: https://doi.org/10.1016/j.euroecorev.2018.06.005

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Abstract: College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively. Why are earnings profiles flatter for recent cohorts? We build a parsimonious model of schooling and human capital accumulation on the job, and calibrate it to earnings statistics of workers from the 1940 cohort. The model accounts for 99% of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts (52% for workers without a college education). The flattening in our model results from a single exogenous factor: the increasing price of skills. The higher skill price induces (i) higher college enrollment for recent cohorts and thus a change in the educational composition of workers and (ii) higher human capital at the start of work life for college-educated workers in the recent cohorts, which implies lower earnings growth over the life cycle.

Url: https://www.sciencedirect.com/science/article/pii/S0014292118300916

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Authors: Kong, Yu-Chien; Ravikumar, B.; Vandenbroucke, Guillaume

Periodical (Full): European Economic Review

Issue:

Volume: 107

Pages: 157-184

Data Collections: IPUMS USA

Topics: Education, Labor Force and Occupational Structure

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