4.1 Common Ø value
In order to test the robustness of the findings to the schooling parameter, we have solved the model when is the same for both ability types. Table A4 in Appendix reports the calibrated parameters for this alternative specification. All parameters are re-calibrated following the procedure described in Section 2.2 with the exception of ñ and Ø. Ñ is kept constant, while Ø is set to match the average time spent studying for the aggregate economy. This statistic is obtained from ATUS (2003-2012) and it is equal to 0.008. fig.A2 in Appendix shows the impulse response functions for the main variables of interest, while the second column of Table3 reports the business cycle statistics. The results are qualitatively the same as in Model1. The main findings of the model are driven by the productivity in learning ,€, rather than the exponent Ø. Quantitatively, the model with a common Ø value generates a higher volatility of hours worked. Compared to Model1, when Øhight= Ølow, young high-types study less in the steady state and more during econtraction. The volatility of education rise, which leads to the increase in……… However , the reduction of study house in the steady state that is predicted by the model is not consistent with the data, as show in Fig. A3 in Appendix . The model is not able to match the life-cycle profile of education. Even for low values of …. Therefore, Model1 remains our preferred specification. Note that this is a conservative choice.