Discussion Paper

Human capital, aggregate shocks, and panel data estimation

Abstract: This paper analyses how the wage and employment decisions of females are affected by past workforce participation and hours supplied. Our estimation methods exploit the fact that, when markets are complete, the Lagrange multiplier for an agents lifetime budget constraint always enters multiplicatively with the prices of (contingent claims to) consumption and leisure. Depending on the properties of the equilibrium price process, it is thus possible to predict the behavior of a wealthy agent by observing that of a poorer person living in a more prosperous world. This provides the key to estimating, nonparametrically, the expectations that enter the calculus of equilibrium decisionmaking, and ultimately the structural parameters which characterize preferences.

Keywords: Wages; Human capital;

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Discussion Paper / Institute for Empirical Macroeconomics

Publication Date: 1990

Number: 47