Returns to education and wage equations: a dynamic approach

Abstract

We study the impact of education on within-groups wage inequality using quantile-regression techniques and US data for the period 1980 to 1987. Our contribution consists of comparing estimates based on a standard Mincer equation with estimates based on a modified Mincer equation in which past earnings play the role of additional explanatory variable. We find that a dynamic model does not give the same answer as a static model regarding the impact of schooling on earnings dispersion, and provide an explanation for this result.

Acknowledgement

Financial support by the European Commission (EDWIN Project, HPSE-CT-2002-00108) is gratefully acknowledged. I sincerely thank Pedro Telhado Pereira, Santiago Budría and the participants at the 6th Meeting of the EDWIN Project for their valuable comments. The usual disclaimer applies.

Notes

¹ See Martins and Pereira (2004).

² Martins and Pereira (2004) provide an exhaustive discussion of the concept of total return to schooling.

³ Jobs in same industries require more years of education than in other industries.