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Do Mincerian Wage Equations Inform How Schooling Influences Productivity?

Author

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  • Christian Groth
  • Jakub Growiec

Abstract

We study the links between the Mincerian wage equation (the cross-sectional relationship between wages and years of schooling) and the human capital production function (the causal effect of schooling on labor productivity). Based on a stylized Mincerian general equilibrium model with imperfect substitutability across skill types and ex ante identical workers, we demonstrate that the mechanism of compensating wage differentials renders the Mincerian wage equation uninformative for the human capital production function. Proper identification of the human capital production function should take into account the equilibrium allocation of individuals across skill types.

Suggested Citation

  • Christian Groth & Jakub Growiec, 2017. "Do Mincerian Wage Equations Inform How Schooling Influences Productivity?," EUSP Department of Economics Working Paper Series 2017/04, European University at St. Petersburg, Department of Economics.
  • Handle: RePEc:eus:wpaper:ec2017_04
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    References listed on IDEAS

    as
    1. Growiec, Jakub & Groth, Christian, 2015. "On aggregating human capital across heterogeneous cohorts," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 21-38.
    2. N/A, 2000. "At a Glance," National Institute Economic Review, National Institute of Economic and Social Research, vol. 174(1), pages 2-2, October.
    3. Growiec, Jakub, 2010. "Human Capital, Aggregation, And Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 14(2), pages 189-211, April.
    4. N/A, 2000. "At a Glance," National Institute Economic Review, National Institute of Economic and Social Research, vol. 172(1), pages 2-2, April.
    5. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    6. N/A, 2000. "At a Glance," National Institute Economic Review, National Institute of Economic and Social Research, vol. 171(1), pages 2-3, January.
    7. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
    8. Benjamin F. Jones, 2008. "The Knowledge Trap: Human Capital and Development Reconsidered," NBER Working Papers 14138, National Bureau of Economic Research, Inc.
    9. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Mincerian wage equation; Human capital production function; Skill distribution; Compensating wage differentials; Golden rule of skill formation;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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