This paper argues that skill formation is a life-cycle process and develops the implications of this insight for Scottish social policy. Families are major producers of skills, and a successful policy needs to promote effective families and to supplement failing ones. We present evidence that...

This paper presents economic models of child development that capture the essence of recent findings from the empirical literature on skill formation. The goal of this essay is to provide a theoretical framework for interpreting the evidence from a vast empirical literature, for guiding the next...

This paper examines minority-white wage gaps. Neal and Johnson (1996) show that controlling for ability measured in the teenage years eliminates young adult wage gaps for all groups except for black males, for whom they eliminate 70% of the gap. Their study has been faulted because minority...

In recent decades, the US wage structure has been transformed by a rising college premium, a narrowing gender gap, and increasing persistent and transitory residual wage dispersion. This paper explores the implications of these changes for cross-sectional inequality in hours worked, earnings and...

This paper discusses recent advances in our understanding of differences in human abilities and skills, their sources, and their evolution over the lifecycle.

This paper develops and estimates an overlapping generations general equilibrium model of labor earnings, skill formation and physical capital accumulation with heterogeneous human capital. The model analyzes both schooling choices and post-school on-the-job investment in skills in a framework...

Standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. We derive this result for a specific measure of...

Using a model with constant relative risk-aversion preferences, endogenous labor supply and partial insurance against idiosyncratic wage risk, we provide an analytical characterization of three welfare effects: (a) the welfare effect of a rise in wage dispersion, (b) the welfare gain from...

This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all...

We conduct a systematic empirical study of cross-sectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different...