HUMAN CAPITAL ACCUMULATION AND LABOR MARKET EQUILIBRIUM

Authors

  • Kenneth Burdett,

    1. University of Pennsylvania, U.S.A. University of Essex, U.K. University of Essex, U.K.
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  • Carlos Carrillo-Tudela,

    1. University of Pennsylvania, U.S.A. University of Essex, U.K. University of Essex, U.K.
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  • Melvyn G. Coles

    1. University of Pennsylvania, U.S.A. University of Essex, U.K. University of Essex, U.K.
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    • We would like to thank Pieter Gautier, John Kennan, Jean-Marc Robin, Yoram Weiss, Tanya Baron, Randy Wright, and two referees for their useful comments and insights. This article has also benefited from comments and suggestions of participants at the “Structural Models of the Labor Market and Policy Analysis” conferences held at the Institute of Fiscal Studies (UCL) and Sandbjerg Manor, Denmark, the “Heterogeneous Labor: Search Frictions and Human Capital Investment” conference held at the University of Konstanz, and the “Advances in the Analysis of Labor Markets with Frictions” conference held at the University of Malaga. We would also like to thank participants in seminars at the University of Essex, University of Leicester, University of Vienna, SUNY-Albany, RWI-Essen, and at the SED (2008) and EEA (2008) meetings. All errors are our responsibility. Please address correspondence to: Ken Burdett, Department of Economics, University of Pennsylvania, 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297, USA. E-mail: kennethb@econ.upenn.edu.


  • Manuscript submitted November 2009.

Abstract

We analyze an equilibrium labor market with on-the-job search and experience effects (as workers learn by doing). The analysis yields a Mincer wage equation with worker fixed effects and endogenously determined firm fixed effects. Equilibrium sorting—where over time more experienced workers also tend to move to better paid employment—has a significant impact on wage inequality.

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