A Century of Human Capital and Hours

Abstract

An average person born in the United States in the second half of the 19th century completed 7 years of schooling and spent 58 hours a week working in the market. In contrast, an average person born at the end of the 20th century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30%. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy accounts for 80% of the increase in years of schooling and 88% of the reduction in hours of work. Rising wages alone account for 75% of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25% of the increase in schooling and almost none of the decrease in hours of work. In addition, we show that the mechanism emphasized in the model is consistent with other trends at a more disaggregate level such as the reduction in the racial gap in schooling and the decrease in the cross-sectional dispersion in hours. (JEL E1, I25, J11, O4)

Contribution of demography to economic growth

“…We follow the works of Greenwood et al (2005) and Ramey (2009) in order to account for the impact of technological progress on the value of time. In addition, we follow the work of Restuccia and Vandenbroucke (2013), that assume non-homothetic preferences, in order to assess the impact of the increase in longevity and technological progress on the simultaneous reduction in hours worked and the increase in schooling time during the last hundred and fifty years in the US. Thus, the combination of homeproduction with non-homothetic preferences allows us to account for the historical reduction in paid hours.…”

Health, education, and retirement over the prolonged life cycle: a selective survey of recent research

“…Restuccia and Vandenbroucke (2013) showed that increases in wages and life expectancy account for 88% of the decline in the number of hours worked between the 1870 and 1970 birth cohorts in the US. However, life expectancy alone accounts only for 3% of the decrease in working hours.…”

Exports of primary goods and human capital accumulation

“…Hendricks () suggests that the majority of the variation in educational attainment across countries is due to within‐industry variation rather than industry composition. Restuccia and Vandenbroucke () find that wage and life expectancy have played an essential role in explaining the trends in hours of work and educational attainment of the United States over the period from 1870 to 1970.…”