The Cyclical Behavior of Skill Acquisition

Abstract

We use a business cycle model to analyze the general equilibrium implications of a representative agent's decision to devote time to skill acquisition activities, which are modeled as boosting subsequent labor productivity by increasing the stock of human capital. We use aggregate data on consumption, investment, and labor hours to estimate the parameters of the model, and then use the estimated model and the observed data to infer the aggregate behavior of skill acquisition activities. We find that these activities have important cyclical implications and are distinctly countercyclical; they also exhibit a systematic correspondence with college enrollment data. Journal of Economic Literature Classification Numbers: E32, J22, J24. © 2001 Academic Press.