Mincer income equation

The Mincer income equation (also Mincer wage function ) is an economic model that explains wage income as a function of schooling and work experience. The model is named after its inventor Jacob Mincer . The equation has been used to analyze numerous data sets. According to the Canadian economist Thomas Lemieux , it is "one of the most widely used models in empirical economics".

model

In the standard version, the logarithm of income is modeled as the sum of the years of education and a quadratic function of the "possible years of work experience".

${\displaystyle \ln w=f(s,x)=\ln w_{0}+\rho s+\beta _{1}x+\beta _{2}x^{2}}$

The variables have the following meanings. denotes the income (the intercept indicates the modeled income of a person without education or work experience); are the years of education; the years of potentially possible work experience. The parameters , and can by means of linear regression are estimated and are each as educational interpretation and information returns. ${\displaystyle w}$ ${\displaystyle w_{0}}$ ${\displaystyle s}$ ${\displaystyle x}$ ${\displaystyle \rho }$ ${\displaystyle \beta _{1}}$ ${\displaystyle \beta _{2}}$

The equation can be formally derived based on a theoretical model of individual decisions about investing in human capital .

use

The Mincer Income Equation is a standard approach in empirical economics research to estimate returns to education and returns from improvements in school quality. The model is also used to analyze the relationship between economic growth and average educational levels in different countries.

Trivia

Sherwin Rosen made a memorable note in his Recognition of Mincer's Merit article that data analyzed using the equation can be referred to as Mincered .

Individual evidence

1. ^ Jacob Mincer: Investment in Human Capital and Personal Income Distribution . In: Journal of Political Economy . 66, No. 4, 1958, pp. 281-302. doi : 10.1086 / 258055 .
2. ^ J. Mincer: Schooling, Experience and Earnings . National Bureau of Economic Research, New York 1974.
3. ↑ ^{a b} Lemieux, Thomas. (2006) "The 'Mincer equation' Thirty Years after Schooling, Experience, and Earnings " in Jacob Mincer: A Pioneer of Modern Labor Economics , Shoshanna Grossbard, ed., Springer: New York. pp. 127-145.
4. ↑ ^{a b} James J. Heckman, Lance J. Lochner, Petra E. Todd: Fifty Years of Mincer earnings regressions . In: NBER Working Paper No. 9732 . 2003. doi : 10.3386 / w9732 .
5. ↑ Sherwin Rosen: Distinguished Fellow: Mincering Labor Economics . In: Journal of Economic Perspectives . 6, No. 2, 1992, pp. 157-170. doi : 10.1257 / jep.6.2.157 .