Using panel data taken from the NLSY, I perform the joint estimation of i) a reduced-form
dynamic model of the transition from one grade level to the next with observed and
unobserved heterogeneity, and ii) a flexible version of the celebrated Mincerian wage
regression with skill heterogeneity, non-linearity in schooling, non-separability between the
effects of schooling and experience and heteroskedasticity (after conditioning on unobserved
skills). The model rejects all simplifying assumptions common in the empirical literature. In
particular, the log wage regression is highly convex, even after conditioning on unobserved
and observed skills. Skill heterogeneity is also found to be over-estimated when non-linearity
is ignored. After conditioning on skill heterogeneity, schooling has a causal effect on wage
growth. I find that estimates obtained in a standard framework (assuming separability) may
underestimate the returns to schooling upon labor market entrance by as much as 15%.
Finally, I find that the variance of the stochastic wage shock decreases with accumulated
experience but is more or less independent of schooling.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.