Human capital accumulation and the intertemporal elasticity of substitution of labor: How large is the bias?

I consider two different skill accumulation technologies, learning by doing and Ben-Porath type training. The effect of human capital accumulation in the form of learning by doing is to increase the labor supply elasticity estimate by a factor of 2.1 relative to the estimate that ignores human capital accumulation. The results are similar for the Ben-Porath type training technology, although the estimate of the bias is somewhat higher.

► Assess bias on labor supply elasticities from omission of human capital accumulation. ► Two skill accumulation technologies: learning by doing and Ben-Porath type training. ► Learning by doing increases labor supply elasticity by factor of 2.1. ► Ben-Porath type training increases estimates slightly more.