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A Risk Augmented Mincer Earnings Equation? Taking Stock

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  • Hartog, Joop

    (University of Amsterdam)

Abstract

We survey the literature on the Risk Augmented Mincer equation that seeks to estimate the compensation for uncertainty in the future wage to be earned after completing an education. There is wide empirical support for the predicted positive effect of wage variance and the negative effect of wage skew. We discuss robustness of the findings across specifications, potential bias from unobserved heterogeneity and selectivity and consider the core issue of students’ information on benefits from education.

Suggested Citation

  • Hartog, Joop, 2009. "A Risk Augmented Mincer Earnings Equation? Taking Stock," IZA Discussion Papers 4439, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4439
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    References listed on IDEAS

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    1. Flyer, Fredrick & Rosen, Sherwin, 1997. "The New Economics of Teachers and Education," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 104-139, January.
    2. Belzil, Christian & Leonardi, Marco, 2007. "Can risk aversion explain schooling attainments? Evidence from Italy," Labour Economics, Elsevier, vol. 14(6), pages 957-970, December.
    3. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
    4. McKenzie, David & Gibson, John & Stillman, Steven, 2013. "A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?," Journal of Development Economics, Elsevier, vol. 102(C), pages 116-127.
    5. Tsiang, S C, 1972. "The Rationale of the Mean-Standard Deviation Analysis, Skewness Preference, and the Demand for Money," American Economic Review, American Economic Association, vol. 62(3), pages 354-371, June.
    6. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    7. Saks Raven E & Shore Stephen H, 2005. "Risk and Career Choice," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-45, October.
    8. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    9. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1203-1213, Nov.-Dec..
    10. Garrett, Thomas A. & Sobel, Russell S., 1999. "Gamblers favor skewness, not risk: Further evidence from United States' lottery games," Economics Letters, Elsevier, vol. 63(1), pages 85-90, April.
    11. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
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    Cited by:

    1. Schweri, Juerg & Hartog, Joop & Wolter, Stefan C., 2011. "Do students expect compensation for wage risk?," Economics of Education Review, Elsevier, vol. 30(2), pages 215-227, April.

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    More about this item

    Keywords

    earnings function; human capital; risk;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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