Micro- And Macroeconomic Implications Of Heterogeneity In The Production Of Human Capital

Abstract

We derive a tractable nonlinear earnings function that we estimate separately individual by individual using NLSY79 data. We obtain three ability measures, a rate of skill depreciation, a time discount rate, and a population-wide estimate of the human capital rental rate. We utilize these parameters to verify a number of heretofore untested theorems based on the life cycle model. We show how these human capital production function parameters relate to cognitive ability, personality traits, and family background. Finally, we show that accounting for individual-specific heterogeneity dramatically reduces estimates of population-wide persistence of permanent and transitory shocks by over 50 percent.

Publication Date

12-1-2015

Publication Title

Journal of Political Economy

Volume

123

Issue

6

Number of Pages

1410-1455

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1086/683989

Socpus ID

84957403995 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84957403995

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