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How well does a dynamic Mincer equation fit NLSY data? Evidence based on a simple wage-bargaining model

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  • Corrado Andini

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Abstract

This article argues that a dynamic Mincer equation can be seen as the solution of a simple wage-bargaining model between a worker and an employer where the unemployment-benefit level, affecting the outside option of the worker, depends on past wages. Further, it shows that this model provides a good fit of the US National Longitudinal Survey of Youth data. The evidence is robust to a number of sensitivity checks. Copyright Springer-Verlag 2013

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 44 (2013)
Issue (Month): 3 (June)
Pages: 1519-1543

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Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1519-1543

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Related research

Keywords: Mincer equation; Wages; Human capital; Bargaining; I21; J31;

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References

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  1. Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
  2. Corrado Andini, 2010. "A dynamic Mincer equation with an application to Portuguese data," Applied Economics, Taylor & Francis Journals, vol. 42(16), pages 2091-2098.
  3. Fatih Guvenen, 2007. "An Empirical Investigation of Labor Income Processes," NBER Working Papers 13394, National Bureau of Economic Research, Inc.
  4. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  5. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Francis Vella & Marno Verbeek, 1998. "Whose wages do unions raise? A dynamic model of unionism and wage rate determination for young men," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(2), pages 163-183.
  8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  9. Chéron, Arnaud & Langot, François, 2010. "On-the-job search equilibrium with endogenous unemployment benefits," Labour Economics, Elsevier, vol. 17(2), pages 383-391, April.
  10. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  11. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
  12. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  13. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  14. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
  15. Philip A. Trostel, 2005. "Nonlinearity in the return to education," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 191-202, May.
  16. Flannery, Mark J. & Rangan, Kasturi P., 2006. "Partial adjustment toward target capital structures," Journal of Financial Economics, Elsevier, vol. 79(3), pages 469-506, March.
  17. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  18. Burkhard Heer, 2002. "Should Unemployment Benefits be Related to Previous Earnings?," CESifo Working Paper Series 747, CESifo Group Munich.
  19. Andini, Corrado, 2009. "How Fast Do Wages Adjust to Human-Capital Productivity? Dynamic Panel-Data Evidence from Belgium, Denmark and Finland," IZA Discussion Papers 4583, Institute for the Study of Labor (IZA).
  20. Corrado Andini, 2007. "Returns to education and wage equations: a dynamic approach," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 577-579.
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Citations

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Cited by:
  1. Andini, Corrado, 2013. "Persistence Bias and the Wage-Schooling Model," IZA Discussion Papers 7186, Institute for the Study of Labor (IZA).
  2. Frieder Kropfhäußer & Marco Sunder, 2014. "A Weighty Issue Revisited: The Dynamic Effect of Body Weight on Earnings and Satisfaction in Germany," SOEPpapers on Multidisciplinary Panel Data Research 635, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Andini, Corrado, 2014. "Persistence Bias and Schooling Returns," IZA Discussion Papers 8143, Institute for the Study of Labor (IZA).
  4. Kropfhäußer, Frieder & Sunder, Marco, 2013. "A weighty issue revisited: the dynamic effect of body weight on earnings and satisfaction in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79895, Verein für Socialpolitik / German Economic Association.

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