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Separating uncertainty from heterogeneity in life cycle earnings

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  • Flavio Cunha
  • James Heckman
  • Salvador Navarro

Abstract

This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60% of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 57 (2005)
Issue (Month): 2 (April)
Pages: 191-261

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Handle: RePEc:oup:oxecpp:v:57:y:2005:i:2:p:191-261

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  13. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
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