<p>I find the labor-leisure model with utility functions interesting, but I find it lacks the factor of work experience, which is very important in the real life labor market.</p>
<p>This is a reason people why people might start working for a lower wage or even do unpaid internships.</p>
<p>I tried searching for a labor-leisure model including the work experience factor in the internet but had no luck.</p>
<p>I remember doing the following linear regression model in econometrics:</p>
<p><span class="math-container">$\log(Wage_{it}) = \alpha + \beta \cdot \log(Experience_{it}) + \epsilon_{it}$</span></p>
<p>So maybe we could solve for the wage here and plug into the usual budget constraint?</p>
<p>By exponentiating, we get</p>
<p><span class="math-container">$w_t = w_0 {E_t}^\beta$</span></p>
<p>where <span class="math-container">$w_0 := e^\alpha$</span> and <span class="math-container">$E_t$</span> is experience, which we could define as <span class="math-container">$E_t = \sum_{k=1}^{t} L_k$</span> (the total amount of time worked in the agent’s lifetime)?</p>
<p>With this we would get</p>
<p><span class="math-container">$\max \sum_{t=0}^{\infty} \beta^t [U(c_t, l_t)]$</span></p>
<p>subject to</p>
<p><span class="math-container">$w_0 (\sum_{k=1}^{t} L_k)^\beta + (1+r_{t+1}) s_t = c_t + s_{t+1}$</span></p>
<p>Here <span class="math-container">$l_t := T - L_t$</span> is leisure, where <span class="math-container">$T$</span> is the time endowment on each period.</p>
<p>I would appreciate any insight on an extension of this kind.</p>

CC BY-SA 4.0
2023-07-27T18:37:16.357Z
I dont have time for full answers but there are models with experience, one example: https://www.jstor.org/stable/145087?casa_token=J2qADYf4mCMAAAAA%3AtAOMkRlv1ILTPXrrFXsu16jGv6Bqc15-K_PIKk2huMp0-br9W_xj78vhVXv8i9nIPEBbPP__P7lc-wXIGHMD2FWVDmQL8Jr0eiEAAVXuMe5iskE16dMR
1muflon1
CC BY-SA 4.0
2023-07-27T19:02:36.047Z
@1muflon1 Thank you! I'll check the paper when I have time.
Nicolas Torres
<microeconomics><econometrics><labor-economics><optimization><model>
Is there a labor vs leisure model with work experience?
Nicolas Torres
# Is there a labor vs leisure model with work experience?

(Asked by: username_0 on 2023-07-27)

I find the labor-leisure model with utility functions interesting, but I find it lacks the factor of work experience, which is very important in the real life labor market.

This is a reason people why people might start working for a lower wage or even do unpaid internships.

I tried searching for a labor-leisure model including the work experience factor in the internet but had no luck.

I remember doing the following linear regression model in econometrics:

$\log(Wage\_{it}) = \alpha + \beta \cdot \log(Experience\_{it}) + \epsilon\_{it}$

So maybe we could solve for the wage here and plug into the usual budget constraint?

By exponentiating, we get

$w\_t = w\_0 {E\_t}^\beta$

where $w\_0 := e^\alpha$ and $E\_t$ is experience, which we could define as $E\_t = \sum\_{k=1}^{t} L\_k$ (the total amount of time worked in the agent’s lifetime)?

With this we would get

$\max \sum\_{t=0}^{\infty} \beta^t [U(c\_t, l\_t)]$

subject to

$w\_0 (\sum\_{k=1}^{t} L\_k)^\beta + (1+r\_{t+1}) s\_t = c\_t + s\_{t+1}$

Here $l\_t := T - L\_t$ is leisure, where $T$ is the time endowment on each period.

I would appreciate any insight on an extension of this kind.

**Tags:** microeconomics, econometrics, labor-economics, optimization, model

> **Comments:**
> **username_1**: I dont have time for full answers but there are models with experience, one example: https://www.jstor.org/stable/145087?casa_token=J2qADYf4mCMAAAAA%3AtAOMkRlv1ILTPXrrFXsu16jGv6Bqc15-K_PIKk2huMp0-br9W_xj78vhVXv8i9nIPEBbPP__P7lc-wXIGHMD2FWVDmQL8Jr0eiEAAVXuMe5iskE16dMR  
> **username_0**: @username_1 Thank you! I'll check the paper when I have time.  

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## 0 answers

