Human Capital and Earnings Distribution Dynamics
39 Pages Posted: 6 Dec 2002 Last revised: 4 Feb 2021
Date Written: December 2002
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 benchmark human capital model can replicate these properties from the right distribution of initial human capital and learning ability. These distributions have the property that learning ability must differ across agents and that learning ability and initial human capital are positively correlated.
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