IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Post schooling human capital investments and the life cycle variance of earnings

  • Thierry Magnac

    (Toulouse School of Economics)

  • Sebastien Roux

    (CREST)

  • Nicolas Pistolesi

    (Toulouse School of Economics (GREMAQ))

We propose an original model of human capital investments after leaving school in which individuals differ in their initial human capital obtained at school, their rate of return, their costs of human capital investments and their terminal values of human capital at retirement. We derive a tractable reduced form Mincerian model of log earnings profiles along the life cycle which is written as a linear factor model in which levels, growth and curvature of earnings profiles are individual-specific. Using panel data from a single cohort of French male wage earners observed over a long span of 30 years, a random effect model is estimated first by pseudo maximum likelihood methods. This step is followed by a simple second step fixed effect method by which individual-specific structural parameters are estimated. This allows us to test restrictions, compute counterfactual profiles and evaluate how earnings inequality over the life-cycle is affected by changes in structural parameters. Under some conditions, even small changes in life expectancy seem to imply large changes in earnings inequality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.economicdynamics.org/meetpapers/2013/paper_426.pdf
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 426.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:red:sed013:426
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htmEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Adriaan S. Kalwij & Rob Alessie, 2007. "Permanent and transitory wages of British men, 1975-2001: year, age and cohort effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 1063-1093.
  2. Manuel Arellano & Stéphane Bonhomme, 2009. "Identifying Distributional Characteristics In Random Coefficients Panel Data Models," Working Papers wp2009_0904, CEMFI.
  3. Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, 05.
  4. Fabien Postel-Vinay & Hélène Turon, 2006. "On-the-job Search, Productivity Shocks, and the Individual Earnings Process," The Centre for Market and Public Organisation 06/141, Department of Economics, University of Bristol, UK.
  5. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  6. Joseph G. Altonji & Anthony A. Smith Jr. & Ivan Vidangos, 2013. "Modeling Earnings Dynamics," Econometrica, Econometric Society, vol. 81(4), pages 1395-1454, 07.
  7. Fatih Guvenen, 2007. "An Empirical Investigation of Labor Income Processes," NBER Working Papers 13394, National Bureau of Economic Research, Inc.
  8. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
  9. Geert Dhaene & Koen Jochmans, 2011. "An Adjusted profile likelihood for non-stationary panel data models with fixed effects," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  10. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  11. Martin Browning & Mette Ejrnaes, 2006. "Modelling income processes with lots of heterogeneity," Economics Series Working Papers 285, University of Oxford, Department of Economics.
  12. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  13. Keisuke Hirano, 2002. "Semiparametric Bayesian Inference in Autoregressive Panel Data Models," Econometrica, Econometric Society, vol. 70(2), pages 781-799, March.
  14. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  15. Geweke, John & Keane, Michael, 2000. "An empirical analysis of earnings dynamics among men in the PSID: 1968-1989," Journal of Econometrics, Elsevier, vol. 96(2), pages 293-356, June.
  16. Robert A. Moffitt & Peter Gottschalk, 2011. "Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004," NBER Working Papers 16833, National Bureau of Economic Research, Inc.
  17. Laura Hospido, 2007. "Modelling Heterogeneity And Dynamics In The Volatility Of Individual Wages," Working Papers wp2007_0717, CEMFI.
  18. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  19. Lorenzo Cappellari, 2004. "The Dynamics and Inequality of Italian Men’s Earnings: Long-term Changes or Transitory Fluctuations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  20. Stéphane Bonhomme & Jean-Marc Robin, 2009. "Assessing the Equalizing Force of Mobility Using Short Panels: France, 1990-2000," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 63-92.
  21. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "General Equilibrium Treatment Effects: A Study of Tuition Policy," NBER Working Papers 6426, National Bureau of Economic Research, Inc.
  22. Okui, Ryo, 2009. "The optimal choice of moments in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 151(1), pages 1-16, July.
  23. Fatih Guvenen & Burhanettin Kuruscu, 2012. "Understanding The Evolution Of The Us Wage Distribution: A Theoretical Analysis," Journal of the European Economic Association, European Economic Association, vol. 10(3), pages 482-517, 05.
  24. Sologon, Denisa Maria & O'Donoghue, Cathal, 2009. "Earnings Dynamics and Inequality among Men across 14 EU Countries, 1994-2001: Evidence from ECHP," IZA Discussion Papers 4012, Institute for the Study of Labor (IZA).
  25. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
  26. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March.
  27. Stéphane Bonhomme & Jean-Marc Robin, 2010. "Generalized Non-Parametric Deconvolution with an Application to Earnings Dynamics," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 491-533.
  28. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
  29. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-54, March.
  30. P. Charnoz & É. Coudin & M. Gaini, 2011. "Wage inequalities in France 1976-2004: a quantile regression analysis," Documents de Travail de la DESE - Working Papers of the DESE g2011-06, Institut National de la Statistique et des Etudes Economiques, DESE.
  31. Aakvik, Arild & Heckman, James J. & Vytlacil, Edward J., 2005. "Estimating treatment effects for discrete outcomes when responses to treatment vary: an application to Norwegian vocational rehabilitation programs," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 15-51.
  32. Sylvie Le Minez & Sébastien Roux, 2002. "Les différences de carrières salariales à partir du premier emploi," Économie et Statistique, Programme National Persée, vol. 351(1), pages 31-63.
  33. Mincer, Jacob, 1997. "The Production of Human Capital and the Life Cycle of Earnings: Variations on a Theme," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S26-47, January.
  34. Horowitz, Joel L & Markatou, Marianthi, 1996. "Semiparametric Estimation of Regression Models for Panel Data," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 145-68, January.
  35. Fatih Guvenen, 2005. "Learning Your Earning: Are Labor Income Shocks Really Very Persistent?," Macroeconomics 0507004, EconWPA.
  36. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  37. Dickens, Richard, 2000. "The Evolution of Individual Male Earnings in Great Britain: 1975-95," Economic Journal, Royal Economic Society, vol. 110(460), pages 27-49, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed013:426. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.