Human capital and earnings distribution dynamics

Mark Huggett, Gustavo Ventura, Amir Yaron

Research output: Contribution to journalArticle

52 Scopus citations

Abstract

Earnings heterogeneity plays a crucial role in modern macroeconomics. We document that mean earnings and measures of earnings dispersion and skewness all increase in US data over most of the working life-cycle for a typical cohort as the cohort ages. We show that (i) a human capital model can replicate these properties from the right distribution of initial human capital and learning ability, (ii) differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and (iii) differences in learning ability account for the bulk of the variation in the present value of earnings across agents. These findings emphasize the need to further understand the role and origins of initial conditions.

Original languageEnglish (US)
Pages (from-to)265-290
Number of pages26
JournalJournal of Monetary Economics
Volume53
Issue number2
DOIs
StatePublished - Mar 1 2006

    Fingerprint

Keywords

  • Earnings distribution
  • Heterogeneity
  • Human capital

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this