Mincer's Overtaking Point and the Life Cycle Earnings Distribution

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. The current research program deals with (1) mobility and flexibility of labor, (2) internationalization of labor markets, (3) welfare state and labor market, (4) labor markets in transition countries, (5) the future of labor, (6) evaluation of labor market policies and projects and (7) general labor economics. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available on the IZA website (www.iza.org) or directly from the author. In the years since Mincer's seminal work, he as well as his students and colleagues extended the original human capital model, reaching important conclusions about a whole array of observations pertaining to human wellbeing. This line of research explained why education enhances earnings; why earnings rise at a diminishing rate throughout one's life; why earnings growth is smaller for those anticipating intermittent labor force participation; why men earn more than women; why whites earn more than blacks; why occupational distributions differ by gender; why geographic and job mobility predominate among the young; why unemployment is lower among the skilled; and why numerous other labor market phenomena occur. This paper surveys the answers to these and other questions based on research emanating from Mincer's original discovery. In addition, this paper provides new empirical evidence regarding Mincer's concept of the "overtaking age" -a topic not currently well explored in the literature. In this latter vein, the paper shows that Mincer's original finding of a U-shaped (log) variance of earnings over the life cycle i...

Microfoundations of Earnings Differences

“…Predicting this trough is unique to the human capital model. Mincer verified this with US data, Brown (1980) found some evidence, and Polachek (2003) corroborated this with Luxemburg Income Study (LIS) data from nine countries.…”

“…However, interestingly, holding schooling level constant, relative earnings differences (as measured by the variance of the logarithm of earnings) should narrow with experience then widen, exhibiting a U-shaped log variance of earnings (Polachek, 2003).…”

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“…Given the uniqueness of these results, Polachek (2003) examined whether these patterns generalize to the U.S. and to the economies of other country. He used the 1980 and 1990 Census to examine U.S. earnings variations over the life cycle.…”

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“…We do not have information on the respondents' income. Yet, education and work experiencebeing important drivers of income (Polachek, 2003) are (partly) captured by the background variables. We expect that respondents with a general interest in sport (interest sport) and a particular interest in Slagelse B&I (Interest SBI) generally have a higher WTP and therefore enter a dummy variable which equals 1 if the respondent has ticked "5-10" where "10" is highest.…”