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Returns to education and wage equations: a dynamic approach

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  • Corrado Andini

Abstract

We study the impact of education on within-groups wage inequality using quantile-regression techniques and US data for the period 1980 to 1987. Our contribution consists of comparing estimates based on a standard Mincer equation with estimates based on a modified Mincer equation in which past earnings play the role of additional explanatory variable. We find that a dynamic model does not give the same answer as a static model regarding the impact of schooling on earnings dispersion, and provide an explanation for this result.

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  • Corrado Andini, 2007. "Returns to education and wage equations: a dynamic approach," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 577-579.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:8:p:577-579
    DOI: 10.1080/13504850500461555
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    1. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    2. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-458, March.
    3. 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.
    4. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    5. Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
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    Cited by:

    1. Joanna Tyrowicz & Lucas van der Velde, 2017. "When the opportunity knocks: large structural shocks and gender wage gaps," GRAPE Working Papers 2, GRAPE Group for Research in Applied Economics.
    2. Andini, Corrado, 2017. "Tertiary Education for All and Wage Inequality: Policy Insights from Quantile Regression," IZA Policy Papers 132, Institute of Labor Economics (IZA).
    3. 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 of Labor Economics (IZA).
    4. Corrado Andini, 2010. "Within-groups wage inequality and schooling: further evidence for Portugal," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3685-3691.
    5. Andersson, Roland & Nabavi Larijani, Pardis & Wilhelmsson, Mats, 2013. "The impact of vocational education and training on income in Sweden," Working Paper Series 13/4, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    6. Karolina Goraus & Joanna Tyrowicz & Lucas van der Velde, 2017. "How (Not) to make women work?," GRAPE Working Papers 1, GRAPE Group for Research in Applied Economics.
    7. Massimiliano Agovino Author-Email: agovino.massimo@gmail.com & Antonio Garofalo Author-Email: antonio.garofalo@uniparthenope.it, 2016. "The Impact of Education on Wage Determination between Workers in Southern and Central-Northern Italy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(1), pages 25-43, March.
    8. Corrado Andini, 2010. "A dynamic Mincer equation with an application to Portuguese data," Applied Economics, Taylor & Francis Journals, vol. 42(16), pages 2091-2098.
    9. Marconi, Gabriele, 2015. "Dynamic returns to schooling by work experience," MPRA Paper 88073, University Library of Munich, Germany.
    10. Corrado Andini, 2009. "Wage Bargaining and the (Dynamic) Mincer Equation," Economics Bulletin, AccessEcon, vol. 29(3), pages 1842-1849.
    11. Savina Finardi & Jakub Fischer, 2017. "The estimation of Mincer function in conditions of the Czech republic [Odhad Mincerovy funkce v podmínkách České republiky]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2017(3), pages 57-68.
    12. Sebastian Kripfganz & Claudia Schwarz, 2019. "Estimation of linear dynamic panel data models with time‐invariant regressors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(4), pages 526-546, June.
    13. Corrado Andini, 2009. "On the return-risk link in education," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 307-314.
    14. Kripfganz, Sebastian, 2014. "Unconditional Transformed Likelihood Estimation of Time-Space Dynamic Panel Data Models," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100604, Verein für Socialpolitik / German Economic Association.
    15. Karolina Goraus & Joanna Tyrowicz, 2013. "The Goodwill Effect? Female Access to the Labor Market Over Transition: A Multicountry Analysis," Working Papers 2013-19, Faculty of Economic Sciences, University of Warsaw.
    16. Andini, Corrado & Pereira, Pedro T., 2007. "Full-time Schooling, Part-time Schooling, and Wages: Returns and Risks in Portugal," IZA Discussion Papers 2651, Institute of Labor Economics (IZA).
    17. Savina Finardi & Jakub Fischer & Petr Mazouch, 2012. "Odhad míry návratnosti investic do vysokoškolského vzdělání podle oborů, pohlaví a regionů [The Estimation of Internal Rates of Return on Human Capital Investment Differenced by Study Fields, Sex a," Politická ekonomie, Prague University of Economics and Business, vol. 2012(5), pages 563-589.
    18. Andini, Corrado, 2013. "Persistence Bias and the Wage-Schooling Model," IZA Discussion Papers 7186, Institute of Labor Economics (IZA).
    19. Andini, Corrado, 2014. "Persistence Bias and Schooling Returns," IZA Discussion Papers 8143, Institute of Labor Economics (IZA).
    20. Corrado Andini, 2013. "How well does a dynamic Mincer equation fit NLSY data? Evidence based on a simple wage-bargaining model," Empirical Economics, Springer, vol. 44(3), pages 1519-1543, June.
    21. Biagetti, Marco & Scicchitano, Sergio, 2009. "Wage inequality and returns to schooling in Europe: a semi-parametric approach using EU-SILC data," MPRA Paper 19060, University Library of Munich, Germany.
    22. Corrado Andini, 2007. "The total impact of schooling on within-groups wage inequality in Portugal," Applied Economics Letters, Taylor & Francis Journals, vol. 15(2), pages 85-90.

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