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Mincer's Overtaking Point and the Lifecycle Earnings Distribution

  • Polachek, Solomon

    ()

    (Binghamton University, New York)

In 1958 Jacob Mincer pioneered an important approach to understand earnings distribution. In the years since Mincer’s seminal work, he as well as his students and colleagues extended the original human capital model, reaching important conclusions about a whole array of observations pertaining to human wellbeing. This line of research explained why education enhances earnings; why earnings rise at a diminishing rate throughout one’s life; why earnings growth is smaller for those anticipating intermittent labor force participation; why men earn more than women; why whites earn more than blacks; why occupational distributions differ by gender; why geographic and job mobility predominate among the young; why unemployment is lower among the skilled; and why numerous other labor market phenomena occur. This paper surveys the answers to these and other questions based on research emanating from Mincer’s original discovery. In addition, this paper provides new empirical evidence regarding Mincer’s concept of the “overtaking age” – a topic not currently well explored in the literature. In this latter vein, the paper shows that Mincer’s original finding of a U-shaped (log) variance of earnings over the life cycle is upheld in recent data, both for the U.S. as well as at least seven other countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 865.

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Length: 48 pages
Date of creation: Aug 2003
Date of revision:
Publication status: published in: Review of Economics of the Household, 2003, 1 (4), 273-304
Handle: RePEc:iza:izadps:dp865
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  1. Paul Beaudry & David Green, 1997. "Cohort Patterns in Canadian Earnings: Assessing the Role of Skill Premia in Inequality Trends," NBER Working Papers 6132, National Bureau of Economic Research, Inc.
  2. Polachek, Solomon William, 1981. "Occupational Self-Selection: A Human Capital Approach to Sex Differences in Occupational Structure," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 60-69, February.
  3. Jacob Mincer & Boyan Jovanovic, 1981. "Labor Mobility and Wages," NBER Chapters, in: Studies in Labor Markets, pages 21-64 National Bureau of Economic Research, Inc.
  4. Jacob Mincer & Solomon Polachek, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 76-110 National Bureau of Economic Research, Inc.
  5. Polachek, Solomon W. & Kim, Moon-Kak, 1994. "Panel estimates of the gender earnings gap : Individual-specific intercept and individual-specific slope models," Journal of Econometrics, Elsevier, vol. 61(1), pages 23-42, March.
  6. Ashenfelter, O. & Harmon, C. & Oosterbeek, H., 1999. "A Review of Estimates of the Schooling/ Earnings Relationship, with tests for Publication Bias," Papers 99/20, College Dublin, Department of Political Economy-.
  7. Nakosteen, Robert A & Zimmer, Michael A, 2001. "Spouse Selection and Earnings: Evidence of Marital Sorting," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 201-13, April.
  8. Grossbard-Shechtman, Shoshana Amyra, 1984. "A Theory of Allocation of Time in Markets for Labour and Marriage," Economic Journal, Royal Economic Society, vol. 94(376), pages 863-82, December.
  9. Jacob Mincer & Haim Ofek, 1982. "Interrupted Work Careers: Depreciation and Restoration of Human Capital," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 3-24.
  10. Mincer, Jacob, 1978. "Family Migration Decisions," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 749-73, October.
  11. Fernández, Raquel & Rogerson, Richard, 2000. "Sorting and Long-Run Inequality," CEPR Discussion Papers 2352, C.E.P.R. Discussion Papers.
  12. Hartog, Joop & Pfann, Gerard & Ridder, Geert, 1989. "(Non-)graduation and the earnings function : An inquiry on self-selection," European Economic Review, Elsevier, vol. 33(7), pages 1373-1395, September.
  13. David Card & Alan Krueger, 1990. "School Quality and Black/White Relative Earnings: A Direct Assessment," Working Papers 652, Princeton University, Department of Economics, Industrial Relations Section..
  14. Marjorie L. Baldwin & Lester A. Zeager & Paul R. Flacco, 1994. "Gender Differences in Wage Losses from Impairments: Estimates from the Survey of Income and Program Participation," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 865-887.
  15. Moon-Kak Kim & Solomon W. Polachek, 1994. "Panel Estimates of Male-Female Earnings Functions," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 406-428.
  16. Polachek, Solomon W, 1995. "Earnings over the Life Cycle: What Do Human Capital Models Explain?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(3), pages 267-89, August.
  17. David H. Autor, 2001. "Wiring the Labor Market," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 25-40, Winter.
  18. Groot, W. & Oosterbeek, H., 1995. "Stochastic reservation and offer wages," Labour Economics, Elsevier, vol. 2(1), pages 107-107, March.
  19. Chiswick, Carmel U., 1986. "The efficiency-wage hypothesis : Applying a general model of the interaction between labor quantity and quality," Journal of Development Economics, Elsevier, vol. 20(2), pages 311-323, March.
  20. Kumbhakar, Subal C., 1996. "A farm-level study of labor use and efficiency wages in Indian agriculture," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 177-195.
  21. George J. Borjas, 1992. "The Intergenerational Mobility of Immigrants," NBER Working Papers 3972, National Bureau of Economic Research, Inc.
  22. Gronau, Reuben, 1974. "Wage Comparisons-A Selectivity Bias," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1119-43, Nov.-Dec..
  23. Michael, Robert T, 1973. "Education in Nonmarket Production," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 306-27, Part I, M.
  24. Weiss, Yoram & Gronau, Reuben, 1981. "Expected Interruptions in Labour Force Participation and Sex-Related Differences in Earnings Growth," Review of Economic Studies, Wiley Blackwell, vol. 48(4), pages 607-19, October.
  25. Gary S. Becker, 1974. "A Theory of Marriage: Part II," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 11-26 National Bureau of Economic Research, Inc.
  26. Kao, Charng & Polachek, Solomon W & Wunnava, Phanindra V, 1994. "Male-Female Wage Differentials in Taiwan: A Human Capital Approach," Economic Development and Cultural Change, University of Chicago Press, vol. 42(2), pages 351-74, January.
  27. Polachek, Solomon W & Yoon, Bong Joon, 1996. "Panel Estimates of a Two-Tiered Earnings Frontier," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 169-78, March-Apr.
  28. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, June.
  29. Paglin, Morton & Rufolo, Anthony M, 1990. "Heterogeneous Human Capital, Occupational Choice, and Male-Female Earnings Differences," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 123-44, January.
  30. Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2002. "Inferring Program Effects for Special Populations: Does Special Education Raise Achievement for Students with Disabilities?," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 584-599, November.
  31. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  32. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  33. Robert J. Barro & Jong-Wha Lee, 1993. "Losers and Winners in Economic Growth," NBER Working Papers 4341, National Bureau of Economic Research, Inc.
  34. Light, Audrey & Ureta, Manuelita, 1995. "Early-Career Work Experience and Gender Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 121-54, January.
  35. Polachek, Solomon William, 1975. "Differences in Expected Post-school Investments as a Determinant of Market Wage Differentials," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 451-70, June.
  36. Robst, John & VanGilder, Jennifer, 2000. "Atrophy rates in male and female occupations," Economics Letters, Elsevier, vol. 69(3), pages 407-413, December.
  37. B. F. Kiker & M. Mendes de Oliveira, 1992. "Optimal Allocation of Time and Estimation of Market Wage Functions," Journal of Human Resources, University of Wisconsin Press, vol. 27(3), pages 445-471.
  38. repec:cup:cbooks:9780521367288 is not listed on IDEAS
  39. Polachek, Solomon W & Yoon, Bong Joon, 1987. "A Two-tiered Earnings Frontier Estimation of Employer and Employee Information in the Labor Market," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 296-302, May.
  40. Polachek, Solomon W. & Robst, John, 1998. "Employee labor market information: comparing direct world of work measures of workers' knowledge to stochastic frontier estimates," Labour Economics, Elsevier, vol. 5(2), pages 231-242, June.
  41. Goldin, Claudia & Polachek, Solomon, 1987. "Residual Differences by Sex: Perspectives on the Gender Gap in Earnings," American Economic Review, American Economic Association, vol. 77(2), pages 143-51, May.
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