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Current earnings, persistence and schooling returns

Author

Listed:
  • Corrado Andini
  • José Eusébio Santos

Abstract

Purpose - The aim is to study the impact of schooling on between-groups wage inequality beyond the lens of the standard approach in the literature. Design/methodology/approach - Simple econometric theory is used to make the main point of the paper. Supporting empirical evidence is also presented. Findings - Disregarding the persistence of current earnings implies a bias in the estimation of the wage return to schooling both at labour-market entry and in the rest of the working life. Research limitations/implications - The use of current earnings as a dependent variable in wage-schooling models may be problematic and requires specific handling. Social implications - The impact of schooling on the between-groups dimension of wage inequality may be different than previously thought. Originality/value - The paper is the first to show that, when current earnings are used as a dependent variable, the identification of a wage-schooling model with the standard (time-invariant external instrument-variable) approach may lead to misleading conclusions.

Suggested Citation

  • Corrado Andini & José Eusébio Santos, 2023. "Current earnings, persistence and schooling returns," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(2), pages 319-337, June.
    • Handle: RePEc:eme:jespps:jes-12-2022-0630
    DOI: 10.1108/JES-12-2022-0630
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    More about this item

    Keywords

    Schooling; Wages; Dynamic models; C23; I21; J31;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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