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Do Mincerian wage equations inform how schooling influences productivity?

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  • Christian Groth

    (University of Copenhagen)

  • Jakub Growiec

    (Narodowy Bank Polski and SGH Warsaw School of Economics)

Abstract

We study the links between the Mincerian wage equation (the cross-sectional relationship between wages and years of schooling) and the human capital production function (the causal effect of schooling on labor productivity). Based on a stylized Mincerian general equilibrium model with imperfect substitutability across skill types and ex ante identical workers, we demonstrate that the mechanism of compensating wage differentials renders the Mincerian wage equation uninformative for the human capital production function. Proper identification of the human capital production function should take into account the equilibrium allocation of individuals across skill types.

Suggested Citation

  • Christian Groth & Jakub Growiec, 2018. "Do Mincerian wage equations inform how schooling influences productivity?," NBP Working Papers 279, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:279
    Note: For helpful comments we thank an anonymous reviewer, Michał Gradzewicz, Jakub Mućk, and participants at the international workshop “Economic Growth, Macroeconomic Dynamics and Agent Heterogeneity”, European University at St. Petersburg, May 2017.
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    References listed on IDEAS

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    1. Growiec, Jakub & Groth, Christian, 2015. "On aggregating human capital across heterogeneous cohorts," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 21-38.
    2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
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    Cited by:

    1. Jablonowski Janusz, 2021. "Internal Rate of Return on Investment in Higher Education in Europe," Wroclaw Review of Law, Administration & Economics, Sciendo, vol. 11(1), pages 1-19, December.
    2. Łukasz Jabłoński, 2021. "Ewolucja podejść do kapitału ludzkiego w naukach ekonomicznych," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 91-120.

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    More about this item

    Keywords

    Mincerian wage equation; human capital production function; skill distribution; compensating wage differentials; golden rule of skill formation;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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