Movin On Up: Interpreting the Earnings Experience Profile
Human capital theory provides the generally accepted interpretation of the relationship between earnings and labour market experience, namely that general human capital tends to increase with experience. However, there are other plausible interpretations e.g. search models generally predict that more time in the labour market increases the chance of finding a better match and hence tends to be associated with higher earnings. In this paper we show how a simple search model can be used to predict the amount of earnings growth that can be assigned to search with the residual being assigned to the human capital model. We show how a substantial if not the larger part of the rise in earnings over the life-cycle in Britain can be explained by a simple search model and that virtually all the earnings gap between men and women can be explained in this way. Overall, the evidence suggests that we do need to rethink our interpretation of the returns to experience in earnings functions.
|Date of creation:||Jan 1998|
|Date of revision:|
|Contact details of provider:|| Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP|
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.:
- Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
- Topel, Robert H, 1991.
"Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority,"
Journal of Political Economy,
University of Chicago Press, vol. 99(1), pages 145-76, February.
- Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
- John Schmitt, 1993. "The Changing Structure of Male Earnings in Britain," CEP Discussion Papers dp0122, Centre for Economic Performance, LSE.
- Joseph Altonji & R. Shakotko, 1985.
"Do Wages Rise with Job Seniority?,"
567, Princeton University, Department of Economics, Industrial Relations Section..
- Katz, Lawrence F & Murphy, Kevin M, 1992.
"Changes in Relative Wages, 1963-1987: Supply and Demand Factors,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(1), pages 35-78, February.
- Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
- Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
- Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, 07.
- Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
- Richard Dickens, 1996. "The evolution of individual male earnings in Great Britain 1974-1994," LSE Research Online Documents on Economics 20647, London School of Economics and Political Science, LSE Library.
- Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000.
"The Changing Distribution of Male Wages in the U.K,"
Review of Economic Studies,
Wiley Blackwell, vol. 67(4), pages 635-66, October.
- Amanda Gosling & Stephen Machin & Costas Meghir, 1994. "The changing distribution of male wages in the UK," IFS Working Papers W94/13, Institute for Fiscal Studies.
- A Gosling & Stephen Machin, 1995. "The Changing Distribution of Male Wages in the UK," CEP Discussion Papers dp0271, Centre for Economic Performance, LSE.
- 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.
- Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992.
"Earnings losses of displaced workers,"
Working Paper Series, Macroeconomic Issues
92-28, Federal Reserve Bank of Chicago.
- Katharine G. Abraham & Henry S. Farber, 1986.
"Job Duration, Seniority, and Earnings,"
NBER Working Papers
1819, National Bureau of Economic Research, Inc.
- Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
- Christopher A. Pissarides, 1992.
"Search Unemployment with on-the-job Search,"
CEP Discussion Papers
dp0074, Centre for Economic Performance, LSE.
- Dickens, Richard, 2000. "The Evolution of Individual Male Earnings in Great Britain: 1975-95," Economic Journal, Royal Economic Society, vol. 110(460), pages 27-49, January.
- Richard Dickens, 1996. "The Evolution of Individual Male Earnings in Great Britain 1974-1994," CEP Discussion Papers dp0306, Centre for Economic Performance, LSE.
- repec:cup:cbooks:9780521049399 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0380. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.