Introduction Some relevant literature Becker(Human Capital), Willis and Rosen JPE 1979 Keane and Wolpin JPe 97(Education, work and occupational choices Eckstein and Wolpin Econometrica99(education, work and attainment) · Chris Taber restud Altonji and Shakotko 90 Topel JPe 91 and Topel and Ward QJE Dustmann and meghir reStud 2005 Heckman, Lochner and Cossa(1999)
Introduction Some relevant literature • Becker (Human Capital), Willis and Rosen JPE 1979 • Keane and Wolpin JPE `97 (Education, work and occupational choices) • Eckstein and Wolpin Econometrica `99 (education, work and attainment) • Chris Taber Restud • Altonji and Shakotko `90 • Topel JPE `91 and Topel and Ward QJE • Dustmann and Meghir REStud 2005 • Heckman, Lochner and Cossa (1999)
20 40 60 80 time since entry on labor market (quarter) Wage In apprenticeship - Unskilled wage Skilled wage Log wage difference
0 .05 .1 .15 .2 .25 Log wage difference 3 3.5 4 4.5 5 Log wage 0 20 40 60 80 time since entry on labor market (quarter) ... Wage In apprenticeship Unskilled wage Skilled wage Log wage difference
The model Overview Describes choices from the point where statutory education ends up until mid career We take those who end formal education at 16 Utility is linear in earnings -so effectively individuals would maximise lifetime income except for the fact that they like leisure In our context liquidity constraints and uncertainty are not a factor because of linearity Wages are match specific- So part of wage growth comes from looking for better jobs
The Model Overview • Describes choices from the point where statutory education ends up until mid career. • We take those who end formal education at 16. • Utility is linear in earnings – so effectively individuals would maximise lifetime income except for the fact that they like leisure • In our context liquidity constraints and uncertainty are not a factor because of linearity. • Wages are match specific – So part of wage growth comes from looking for better jobs
Choices Individuals decide whether they will attend apprenticeship or not They trade off future returns with current cost- lost earnings and utility costs Individuals know the distribution of future shocks
Choices • Individuals decide whether they will attend apprenticeship or not. • They trade off future returns with current cost – Lost earnings and utility costs • Individuals know the distribution of future shocks
Choices At the start of their career individuals are assumed to receive with certainty a job offer and an offer for apprenticeship The former involves a wage and a non-pecuniary benefit. The latter a cost shock as well as a wage and benefit We do not model the wait from school to any of the two state above
Choices • At the start of their career individuals are assumed to receive with certainty a job offer and an offer for apprenticeship. • The former involves a wage and a non-pecuniary benefit. The latter a cost shock as well as a wage and benefit. • We do not model the wait from school to any of the two state above