Returns to schooling in a dynamic model
The paper develops a dynamic approach to Mincer equations. It is shown that a static model is based on the restrictive hypotheses that the total return to schooling is constant over the working life and independent of bargaining issues. A dynamic approach allows to show that the total return to scho...
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| Format: | workingPaper |
| Language: | eng |
| Published: |
2015
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| Online Access: | http://hdl.handle.net/10400.3/3307 |
| Country: | Portugal |
| Oai: | oai:repositorio.uac.pt:10400.3/3307 |
| Summary: | The paper develops a dynamic approach to Mincer equations. It is shown that a static model is based on the restrictive hypotheses that the total return to schooling is constant over the working life and independent of bargaining issues. A dynamic approach allows to show that the total return to schooling of a new labor-market entrant positively depends on his/her bargaining power as employee; the total return increases at a decreasing rate in the first part of the working life and depends of bargaining issues; afterwards it becomes roughly constant and independent of bargaining. The main implication is that a static model may produce distorted empirical results when using data on young workers since unable to account for the pattern of the total return to schooling in the first part of the working life. I show the latter using data from the U.S. National Longitudinal Survey of Youth (1980-1987) and analyzing the impact of education on within-group wage inequality a la Martins and Pereira (2004a). However, a static model does not produce distorted empirical results when using data on relatively experienced workers. I show the latter using Portuguese data from the European Community Household Panel (1994-2001). |
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