Abstract
In a previous paper on optimal human capital investment [Theeuwes et al. (1985)] we derived earnings functions based on a lifetime wealth maximization assumption. A Cobb-Douglas specification for the human capital production function resulted in a non-linear estimation equation in which earnings were explained as a function of years of experience. In the present paper we re-estimate this model using individual instead of aggregate data and extend the model with job level information as a contribution to the explanation of the age-income funnel. The latter refers to the increasing variance of the age-income distribution for older age brackets. Assignment to job levels over the life cycle contributes significantly to the variance of the ageincome profile.
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