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Testing the Specification of the Mincer Wage Equation

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Author Info
Christian Belzil () (GATE CNRS)

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Abstract

Using panel data taken from the NLSY, I perform the joint estimation of i) a reduced-form dynamic model of the transition from one grade level to the next with observed and unobserved heterogeneity, and ii) a flexible version of the celebrated Mincerian wage equation with skill heterogeneity, non linearity in schooling, non-separability between the effects of schooling and experience and heteroskedasticity (after conditionning on unobserved skills). The model rejects all symplifying assumptions common in the empirical literature. In particular, the log wage regression is highly convex, even after conditionning on unobserved and observed skills. Skill heterogeneity is also found to be over-estimated when non-linearity is ignored. After conditioning on skill heterogeneity, schooling has a positive effect on wage growth.

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Publisher Info
Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0608.

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Length: 41 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:gat:wpaper:0608

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Related research
Keywords: heterogeneity; Mincer regression; random coefficient models; return to experience; returns to education;

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Find related papers by JEL classification:
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April. [Downloadable!] (restricted)
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  3. John F. Geweke & Michael P. Keane, 1997. "Mixture of normals probit models," Staff Report 237, Federal Reserve Bank of Minneapolis. [Downloadable!]
  4. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  5. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  6. Wooldridge, Jeffrey M., 1997. "On two stage least squares estimation of the average treatment effect in a random coefficient model," Economics Letters, Elsevier, vol. 56(2), pages 129-133, October. [Downloadable!] (restricted)
  7. Belzil, Christian & Hansen, Jörgen, 2002. "Unobserved Ability and the Return to Schooling," IZA Discussion Papers 508, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Belzil, Christian & Hansen, Jörgen, 2003. "Structural Estimates of the Intergenerational Education Correlation," IZA Discussion Papers 973, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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  11. Mark R. Rosenzweig & Kenneth I. Wolpin, 2000. "Natural "Natural Experiments" in Economics," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 827-874, December. [Downloadable!] (restricted)
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  13. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March. [Downloadable!] (restricted)
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  15. Fortin, N.M. & Lemieux, T., 1996. "Rank Regressions, Wage Distributions and the Gender Gap," Cahiers de recherche 9607, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  16. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," IZA Discussion Papers 1700, Institute for the Study of Labor (IZA). [Downloadable!]
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  18. Meghir, Costas & Palme, Marten, 2001. "The Effect of a Social Experiment in Education," Working Paper Series in Economics and Finance 0451, Stockholm School of Economics. [Downloadable!]
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  19. Eckstein, Zvi & Wolpin, Kenneth I., 1998. "Youth Employment and Academic Performance in High School," IZA Discussion Papers 18, Institute for the Study of Labor (IZA).
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  20. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 665-91, July.
  21. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
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  22. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March. [Downloadable!] (restricted)
  23. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, 05. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christian Belzil, 2006. "The Return to Schooling in Structural Dynamic Models: A Survey," IZA Discussion Papers 2370, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2007. "Wage Rigidity and Job Creation," Economics Working Papers 1047, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2008. [Downloadable!]
    Other versions:
  3. Belzil, Christian & Hansen, Jörgen, 2008. "Calibration and IV Estimation of a Wage Outcome Equation in a Dynamic Environment," IZA Discussion Papers 3528, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Belzil, Christian & Hansen, Jörgen & Kristensen, Nicolai, 2008. "Estimating Complementarity between Education and Training," IZA Discussion Papers 3882, Institute for the Study of Labor (IZA). [Downloadable!]
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This page was last updated on 2009-11-19.

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