DP3599 Learning by Doing as a Propagation Mechanism

Author(s): Yongsung Chang , Joao F Gomes , Frank Schorfheide

Publication Date: October 2002

Keyword(s): learning by doing , business cycles , propagation , labour supply

JEL(s): C52 , E32 , J22

Programme Areas: International Macroeconomics , Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP3599.asp

This Paper suggests that skill accumulation through past work experience, or ‘learning-by-doing’ (LBD), can provide an important propagation mechanism in a dynamic stochastic general equilibrium model, as the current labour supply affects future productivity. Our econometric analysis uses a Bayesian approach to combine micro-level panel data with aggregate time series. Formal model evaluation shows that the introduction of the LBD mechanism improves the model's ability to fit the dynamics of aggregate output and hours.