A CENTURY OF HUMAN CAPITAL AND HOURS

Authors

  • DIEGO RESTUCCIA,

    1. Restuccia: Department of Economics, University of Toronto, 150 St. George Street, Toronto, ON M5S 3G7, Canada. Phone 416-978-5114, Fax 416-978-6713, E-mail diego.restuccia@utoronto.ca
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  • GUILLAUME VANDENBROUCKE

    1. Vandenbroucke: University of Southern California, Department of Economics, KAP 316A, Los Angeles, CA, 90089. Phone 213-740-2108, Fax 213-740-8543, E-mail vandenbr@usc.edu
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    • We thank Claudia Goldin and Larry Katz for sharing their data on years of schooling by birth cohort in the United States. We also appreciate helpful comments from Nezih Guner, two anonymous referees, and participants at numerous seminars and conferences. All remaining errors are our own. Restuccia acknowledges financial support from the Social Sciences and Humanities Research Council of Canada.


Abstract

An average person born in the United States in the second half of the 19th century completed 7 years of schooling and spent 58 hours a week working in the market. In contrast, an average person born at the end of the 20th century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30%. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy accounts for 80% of the increase in years of schooling and 88% of the reduction in hours of work. Rising wages alone account for 75% of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25% of the increase in schooling and almost none of the decrease in hours of work. In addition, we show that the mechanism emphasized in the model is consistent with other trends at a more disaggregate level such as the reduction in the racial gap in schooling and the decrease in the cross-sectional dispersion in hours. (JEL E1, I25, J11, O4)

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