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Separating uncertainty from heterogeneity in life cycle earnings

Author

Listed:
  • Cunha, Flavio

    (University of Chicago)

  • Heckman, James

    (University of Chicago)

  • Navarro, Salvador

    (University of Chicago)

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.

Suggested Citation

  • Cunha, Flavio & Heckman, James & Navarro, Salvador, 2004. "Separating uncertainty from heterogeneity in life cycle earnings," Working Paper Series 2005:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2005_006
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    earnings; unforecastable; forecastable;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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