Human Capital and Labor Supply: A Synthesis
NBER Working Paper No. 67
It is by now widely recognized that investment decisions play a major role in the determination of individual age-earnings profiles. The purpose of this paper is to present a simple life-cycle model of investment in human capital in which leisure choices are explicitly incorporated. In so doing, we integrate two previously disparate branches of life-cycle theory: models of labor supply with exogenous wages, and models of human capital formation with exogenous leisure. Of course, to accomplish this, we must posit utility maximization as the individual's goal rather than income maximization.
Published: Blinder, Alan and Weiss, Yoram. "Human Capital and Labor Supply: A Synthesis." Journal of Political Economy, Vol. 83, No. 3, (June 1976), pp. 449-472.