Human capital and job levels: Explaining the age-income funnel

In a previous paper on optimal human capital investment [Theeuwes et al. (1985)] we derived earnings functions based on a lifetime wealth maximization assumption. A Cobb-Douglas specification for the human capital production function resulted in a non-linear estimation equation in which earnings wer...

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Bibliographic Details
Published inEuropean economic review Vol. 33; no. 9; pp. 1839 - 1849
Main Authors Koopmans, Carl C., van Opstal, Rocus, Theeuwes, Jules J.M.
Format Journal Article
LanguageEnglish
Published Amsterdam, etc Elsevier B.V 01.12.1989
Elsevier
North Holland Publishing Company, etc
Elsevier Sequoia S.A
SeriesEuropean Economic Review
Subjects
Age
Capital
Earnings
Economic models
Human capital
Income
Income distribution
Job classification
Older people
Studies
Variables
Variance analysis
Netherlands
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Summary:In a previous paper on optimal human capital investment [Theeuwes et al. (1985)] we derived earnings functions based on a lifetime wealth maximization assumption. A Cobb-Douglas specification for the human capital production function resulted in a non-linear estimation equation in which earnings were explained as a function of years of experience. In the present paper we re-estimate this model using individual instead of aggregate data and extend the model with job level information as a contribution to the explanation of the age-income funnel. The latter refers to the increasing variance of the age-income distribution for older age brackets. Assignment to job levels over the life cycle contributes significantly to the variance of the ageincome profile.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(89)90073-1