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Returns to skills and work experience in Europe. Same or different?

Author

Listed:
  • Mateusz Pipień

    (Cracow University of Economics, Department of Econometrics and Operations Research)

  • Sylwia Roszkowska

    (University of Lodz, Department of Macroeconomics)

Abstract

We estimate the Mincer equations for a set of European countries. Cross country heterogeneity of parameters, describing the impact of years of schooling and experience on wages, was obtained by the application of the system of Seemingly Unrelated Regression Equations (SURE). The differences between parameters were formally tested given two alternative stochastic assumptions. In the first model, no contemporaneous correlations between error terms in the system is imposed. This may be related to the standard country regression approach. In the second approach an unrestricted covariance matrix is considered, making error terms stochastically dependent. The contemporaneous correlations of error terms in the SURE system were empirically supported. Also, rich parameterisation of the covariance matrix of contemporaneous relations reduced the statistical uncertainty about differences in parameters describing the return on education effect. Consequently, substantial country heterogeneity of return on education, which seems intuitively correct, was obtained in the system of regressions with a complex stochastic structure.

Suggested Citation

  • Mateusz Pipień & Sylwia Roszkowska, 2018. "Returns to skills and work experience in Europe. Same or different?," Bank i Kredyt, Narodowy Bank Polski, vol. 49(5), pages 433-460.
    • Handle: RePEc:nbp:nbpbik:v:49:y:2018:i:5:p:433-460
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    References listed on IDEAS

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    More about this item

    Keywords

    Mincer equation; returns to skills; SURE; Zellner estimator;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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