IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp272.html

Heterogeneous Returns to Human Capital and Dynamic Self-Selection

Author

Listed:
  • Belzil, Christian

    (Ecole Polytechnique, Paris)

  • Hansen, Jörgen

    (Concordia University)

Abstract

We estimate a structural dynamic programming model of schooling decisions and obtain individual specific estimates of the local (and average) returns to schooling as well as the returns to experience. Homogeneity of the returns to human capital is strongly rejected in favor of a discrete distribution version of the random coefficient specification. The results indicate that individuals who have the higher returns to schooling are also those who have the higher returns to experience. There is a 5.9 percentage points difference in the average return to schooling at college graduation between high and low market ability individuals (2.3% vs 8.2%) and a 5.4 percentage points difference in the return to experience upon entrance in the labor market (3.1% vs 8.5%). When averaged over all types, the return to experience in the early phase of the life cycle (6.8%) exceeds the average return to schooling (6.4% at college graduation). After condi-tioning on a specific type, the log wage regression function remains rather convex in schooling. The conflictual effects of the returns to schooling and experience on schooling decisions imply weak dynamic self-selection; that is educational attainments are only weakly correlated with individual differences in the returns to schooling.

Suggested Citation

  • Belzil, Christian & Hansen, Jörgen, 2001. "Heterogeneous Returns to Human Capital and Dynamic Self-Selection," IZA Discussion Papers 272, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp272
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp272.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Katja Kaufmann, 2008. "Understanding the Income Gradient in College Attendance in Mexico: The Role of Heterogeneity in Expected Returns to College," Discussion Papers 07-040, Stanford Institute for Economic Policy Research.
    2. Tiago Pires & Arek Szydłowski & Shuai Zhao, 2024. "Firm‐specific Human Capital Accumulation: Evidence from Brazil," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(3), pages 568-605, June.
    3. Christian Belzil & Jörgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," Econometrica, Econometric Society, vol. 70(5), pages 2075-2091, September.
    4. Kohns, Stephan, 2001. "Testing for Asymmetry in British, German and US Unemployment Data," IZA Discussion Papers 341, IZA Network @ LISER.
    5. Chiara Binelli, 2008. "Returns to Education and Increasing Wage Inequality in Latin America," Working Paper series 30_08, Rimini Centre for Economic Analysis.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Fallak (email available below). General contact details of provider: https://edirc.repec.org/data/izaaalu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.