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Unobserved Heterogeneity and Risk in Wage Variance: Does Schooling Provide Earnings Insurance?

Author

Listed:
  • Mazza, Jacopo

    (Utrecht University)

  • van Ophem, Hans

    (University of Amsterdam)

  • Hartog, Joop

    (University of Amsterdam)

Abstract

We apply a recently proposed method to disentangle unobserved heterogeneity from risk in returns to education. We replicate the original study on US men and extend to US women, UK men and German men. Most original results are not robust. A college education cannot universally be considered an insurance against unpredictability of wages. One conclusion is unequivocally confirmed: uncertainty strongly dominates unobserved heterogeneity.

Suggested Citation

  • Mazza, Jacopo & van Ophem, Hans & Hartog, Joop, 2011. "Unobserved Heterogeneity and Risk in Wage Variance: Does Schooling Provide Earnings Insurance?," IZA Discussion Papers 5531, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5531
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    Cited by:

    1. Kässi, Otto, 2012. "Uncertainty and Heterogeneity in Returns to Education: Evidence from Finland," MPRA Paper 43503, University Library of Munich, Germany.
    2. Mazza, Jacopo & van Ophem, Hans & Hartog, Joop, 2013. "Unobserved heterogeneity and risk in wage variance: Does more schooling reduce earnings risk?," Labour Economics, Elsevier, vol. 24(C), pages 323-338.

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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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