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Human Capital Accumulation, Education Policy and Earnings Dispersion
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IZA Seminar |
Place: Schaumburg-Lippe-Str. 9, 53113 Bonn |
Date: 30.09.2003, 12:15 - 13:30 |
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Abstract: |
It has been argued that a close relationship exists between human capital accumulation and
wage dispersion. In this paper we build a general equilibrium OLG model of labor earnings and
endogenous human capital (HC) accumulation, allowing for agents' heterogeneity in both ability and
uninsurable idiosyncratic shocks, and verify whether a specification consistent with recent changes
in UK and US wage inequality can reproduce enrolment rates in education. We use macro and
micro level data to estimate the parameters of a production function with three different kinds
of human capital. A by-product of our estimation procedure is an approximate empirical density
of individual abilities over the working population. We use these estimates to simulate the model
numerically and assess the effects of alternative education policies on inequality, productivity and HC
accumulation. We also discuss some general properties of non concave value functions, with special
focus on uniqueness and continuity of individual optimal policies when choice sets are non-convex. |
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For more information, please contact seminar@iza.org
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