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Returns to education and wage equations

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  • Pedro Telhado Pereira
  • Pedro Silva Martins

Abstract

The paper shows why considering a number of education-dependent covariates in a wage equation decreases the coefficient of education in that equation. This result is illustrated empirically with a meta-analysis for Portugal. The education coefficient decreases when covariates are used that can be considered post-education decisions; on the other hand, it is independent of sample size, tenure and whether hourly or monthly wages are used. These results support the use of a simple specification of the Mincer equation for the study of the total returns to education.

Suggested Citation

  • Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:6:p:525-531
    DOI: 10.1080/0003684042000217571
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    References listed on IDEAS

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    1. Kiker, B. F. & Santos, Maria C. & de Oliveira, M. Mendes, 1997. "Overeducation and undereducation: Evidence for Portugal," Economics of Education Review, Elsevier, vol. 16(2), pages 111-125, April.
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    3. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863, Elsevier.
    4. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    5. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    6. Richard B. Freeman & James L. Medoff, 1979. "The Two Faces of Unionism," NBER Working Papers 0364, National Bureau of Economic Research, Inc.
    7. Kiker, B. F. & Santos, Maria C., 1991. "Human capital and earnings in Portugal," Economics of Education Review, Elsevier, vol. 10(3), pages 187-203, September.
    8. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
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    More about this item

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • I2 - Health, Education, and Welfare - - Education
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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