Experience vs. Obsolescence: A Vintage-Human-Capital Model

I introduce endogenous human-capital accumulation into an infinite-horizon version of Chari & Hopenhayn’s (1991) vintage-human-capital model. Returns to skill and tenure premia are highest in young vin-tages, where skill is scarcest and agents accumulate human capital fastest. As the vintage ages, the skill premium decreases and van-ishes entirely upon vintage death. Workers run through cycles of human-capital accumulation: their wages rise as they accumulate skill, undergo downward pressure as the technology ages, and finally drop sharply when the worker switches to a new technology. The results are in line with German linked employer-employee data: tenure premia are highest in young establishments, as well as in fast-growing indus-tries, occupations and establishments. A calibration exercise suggests that human-capital accumulation is the most important determinant of workers ’ wage profiles, whereas changes to the price of skill and vintage productivity gains play a smaller quantitative role