Book contents
- Frontmatter
- Contents
- List of Contributors
- Preface
- 1 Sorting, Education, and Inequality
- 2 Wage Equations and Education Policy
- Empirical and Theoretical Issues in the Analysis of Education Policy: A Discussion of the Papers by Raquel
- 3 Toward a Theory of Competition Policy
- 4 Identification and Estimation of Cost Functions Using Observed Bid Data: An Application to Electricity Markets
- 5 Liquidity, Default, and Crashes: Endogenous Contracts in General Equilibrium
- 6 Trading Volume
- A Discussion of the Papers by John Geanakoplos and by Andrew W. Lo and Jiang Wang
- 7 Inverse Problems and Structural Econometrics: The Example of Instrumental Variables
- 8 Endogeneity in Nonparametric and Semiparametric Regression Models
- Endogeneity and Instruments in Nonparametric Models: A Discussion of the Papers by Jean-Pierre Florens and by Richard Blundell and James L. Powell
- Index
2 - Wage Equations and Education Policy
Published online by Cambridge University Press: 23 December 2009
- Frontmatter
- Contents
- List of Contributors
- Preface
- 1 Sorting, Education, and Inequality
- 2 Wage Equations and Education Policy
- Empirical and Theoretical Issues in the Analysis of Education Policy: A Discussion of the Papers by Raquel
- 3 Toward a Theory of Competition Policy
- 4 Identification and Estimation of Cost Functions Using Observed Bid Data: An Application to Electricity Markets
- 5 Liquidity, Default, and Crashes: Endogenous Contracts in General Equilibrium
- 6 Trading Volume
- A Discussion of the Papers by John Geanakoplos and by Andrew W. Lo and Jiang Wang
- 7 Inverse Problems and Structural Econometrics: The Example of Instrumental Variables
- 8 Endogeneity in Nonparametric and Semiparametric Regression Models
- Endogeneity and Instruments in Nonparametric Models: A Discussion of the Papers by Jean-Pierre Florens and by Richard Blundell and James L. Powell
- Index
Summary
INTRODUCTION
One of the most widely estimated regression equations in economics is that of the earnings or wage function, which relates a measure of market remuneration (e.g., hourly wage rates or annual earnings) to measures of human capital stocks such as completed schooling and market work experience. In the first half of this paper, I address two related questions: (1) What interpretation should be given to the wage equation? and (2) Why should we care about estimating it?
Twenty-five years ago, Zvi Griliches, in his 1975 Presidential Address to the World Congress of the Econometric Society, raised the first question of interpretation, together with several others that were concerned with the appropriate specification and estimation of the wage function. In that address, Griliches chose to adopt the competitive market–human capital production interpretation of Ben-Porath (1967), in which the wage an individual is offered is the product of the competitively determined skill rental price and the amount of human capital or skill units cumulatively produced by and thus embodied in the individual. About a decade later, Heckman and Sedlacek (1985) and Willis (1986) extended the competitive market–human capital production interpretation of the wage function to a multidimensional skill setting, formally incorporating the self-selection model of Roy (1951) to the choice of employment sector in the former case and to the choice of occupation cum schooling in the latter. More recently, Keane and Wolpin (1997) extended and generalized the Heckman and Sedlacek and Willis papers to a dynamic setting of schooling, employment, and occupational choice, adopting as well the competitive market–human capital production paradigm.
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- Information
- Advances in Economics and EconometricsTheory and Applications, Eighth World Congress, pp. 41 - 72Publisher: Cambridge University PressPrint publication year: 2003
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