Working Paper: CEPR ID: DP10752
Authors: Francesco Caselli
Abstract: The baby-boom cycle has caused very large swings in the relative supply of experienced workers (first a large decline, and then a large increase). Yet, the experience premium has failed to decline markedly in the period where the supply of experience has increased. I develop a methodology to estimate the increase in the relative demand for experience that is required to reconcile the behavor of prices and quantities, and show this to have been large - a phenomenon I dub experience-biased technical change. I conjecture that one of the drivers of experience-biased technical change is a decline in the relative demand for physical strength. In support this conjecture, I show that occupations requiring high or moderate physical strength have accounted for a declining share of weeks worked in the economy, with sedentary occupations experiencing a corresponding increase. I also confirm that older workers have a comparative disadvantage in occupations requiring physical strength.
Keywords: baby boom; experience premium; technical change
JEL Codes: J01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| experience premium (G22) | relative demand for experienced workers (J29) |
| experience-biased technical change (O33) | relative demand for experienced workers (J29) |
| experience-biased technical change (O33) | decline in demand for physical strength (J29) |
| decline in demand for physical strength (J29) | increase in relative demand for experienced workers (J24) |
| structural shifts in labor market (J29) | experience-biased technical change (O33) |
| increase in experience bias (D91) | relative demand for experienced workers (J29) |
| occupations requiring physical strength (J28) | decrease in share of such occupations (J21) |
| increase in sedentary jobs (J29) | decrease in share of occupations requiring physical strength (J21) |
| aging baby boom generation (J11) | increase in experience bias (D91) |
| elasticity of substitution between experienced and inexperienced workers (J24) | experience premium (G22) |