How do Workers Learn? Theory and Evidence on the Roots of Lifecycle Human Capital Accumulation; Daniela Vidart (University of Connecticut)

Abstract

How do the sources of worker learning change over the lifecycle, and how do these changes affect on-the-job human capital accumulation? We use detailed worker qualification data from Germany and the US to document that internal learning (learning through colleagues) decreases with worker experience, while external learning (on-the-job training) has an inverted U-shape in worker experience. To shed light on these findings, we build an analytical model where the incentives to engage in each type of skill acquisition evolve throughout the lifecycle due to shifts in the relative position of the worker in the human capital distribution. We embed this two-source learning mechanism in a quantitative Burdett and Mortensen search framework where firms and workers jointly fund learning investments. The model equilibrium replicates our empirical lifecycle results, as well as several key findings in the literature on the effects of firm matching and coworker quality in the formation of human capital. Counterfactual analyses imply that aggregate human capital decreases by approximately 30% in the absence of either learning source, and that the two sources are highly complementary in the aggregate. We conduct a policy analysis that highlights key inefficiencies to learning investments stemming from firms' role in learning, and shows that subsidizing learning can generate sizeable increases to human capital and aggregate output.

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