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Micro Foundations of Earnings Differences

Listed author(s):
  • Das, Tirthatanmoy

    ()

    (Indian Institute of Management)

  • Polachek, Solomon

    ()

    (Binghamton University, New York)

Registered author(s):

    This paper examines how human capital based approaches explain the distribution of earnings. It assesses traditional, quasi-experimental, and new micro-based structural models, the latter of which gets at population heterogeneity by estimating individual-specific earnings function parameters. The paper finds one's ability to learn and one's ability to retain knowledge are most influential in explaining earnings variations. Marketable skills actually acquired in school depend on these two types of ability. However, schools may also implement ability enhancing interventions which can play a role in improving learning outcomes. Policy initiatives that improve these abilities would be a possible strategy to increase earnings and lower earnings disparity.

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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10922.

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    Length: 80 pages
    Date of creation: Jul 2017
    Handle: RePEc:iza:izadps:dp10922
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