Experience versus obsolescence: Essays on vintage human capital

The premium on experience in the labor market has risen in recent decades in industrialized countries, and so have dispersion and turbulence of earnings. Chapter 1 documents these facts in a data set of German workers. To explain the observed changes, I combine an infinite-horizon version of Ben-Porath's (1967) model of human-capital accumulation with a vintage structure as in Chari and Hopenhayn (1991). In this model, vintage-specific human capital is accumulated endogenously and is lost when the technology is phased out by an endogenous firm decision. I show that returns to skill are highest in young vintages. Accelerated technological change shortens the life cycle of a technology and speeds up obsolescence; the experience premium rises because more workers are concentrated in young technologies with high skill premia. A numerical algorithm is proposed and implemented to solve the (non-standard) system of partial differential equations governing the equilibrium. A calibration exercise comparing two steady states shows that the model quantitatively accounts for the changes in the experience premium, dispersion and turbulence in the German data.;Chapter 2 analyzes a model where vintage human capital is accumulated mechanically using a learning-curve-type specification. This framework shows that it is mainly differences in the relative scarcity of skill across technologies, not differences in human-capital accumulation, that determine wage profiles.