Investigators at Federal Reserve Bank Report Findings in Technology (Time Averaging Meets Heckman, Lochner, and Taber and Ben-porath): Technology

2026 JAN 06 (NewsRx) -- By a News Reporter-Staff News Editor at Engineering Daily News -- Current study results on Technology have been published. According to news reporting originating in St. Louis, Missouri, by NewsRx journalists, research stated, “The Heckman et al. (1998a) (HLT) model includes credit markets and within-period labor supply indivisibilities, two essential features of Ljungqvist and Sargent (2006) ‘time-averaging’ models. But by assuming inelastic labor supplies until a mandatory retirement age, it shuts down time-averaging.”

The news reporters obtained a quote from the research from Federal Reserve Bank, “We activate time-averaging by endogenizing retirement ages. Our addition of a baseline social security system puts all workers at corner solutions of their retirement decisions, letting our model reproduce most outcomes in HLT’s model. By dislodging workers from those corners, social security and tax reforms raise the aggregate labor supply elasticity and can bring about a ‘dual labor market.’ HLT’s Ben-Porath human capital technologies generate steeper earnings profiles for college-educated workers that in our model make their labor supplies more resilient to tax and social security reforms than high school workers’ labor supplies.”

According to the news reporters, the research concluded: “But nonconvexities inherent in the Ben-Porath technologies can bring ‘tipping points’ at which tax increases cause workers who at lower tax rates had chosen long careers and made substantial human capital investments to jump discretely to choosing much shorter careers and doing much less on-the-job human capital accumulation.”

This research has been peer-reviewed.

For more information on this research see: Time Averaging Meets Heckman, Lochner, and Taber and Ben-porath. Review of Economic Dynamics, 2026;59. Review of Economic Dynamics can be contacted at: Academic Press Inc Elsevier Science, 525 B St, Ste 1900, San Diego, CA 92101-4495, USA. (Elsevier - www.elsevier.com; Review of Economic Dynamics - http://www.journals.elsevier.com/review-of-economic-dynamics/)

Our news correspondents report that additional information may be obtained by contacting Victoria Gregory, Federal Reserve Bank, Fed Reserve Bank Plaza, St. Louis, MO 63102, United States. Additional authors for this research include Sebastian Graves, Lars Ljungqvist and Thomas J. Sargent.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.red.2025.101309. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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