Magnac, Thierry, Pistolesi, Nicolas and Roux, Sébastien (2018) Human Capital Investments and the Life Cycle of Earnings. Journal of Political Economy, 126 (3). pp. 1219-1249.

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Abstract

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 a fixed
date in the future. 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.

Available Versions of this Item

• Post schooling human capital investments and the life cycle variance of earnings. (deposited 09 Jul 2014 17:33)
  • Human Capital Investments and the Life Cycle of Earnings. (deposited 16 Dec 2016 13:35) [Currently Displayed]