Mincer earnings function

{{Short description|Equation explaining wages via schooling and experience}}

The Mincer earnings function is a single-equation model that explains wage income as a function of schooling and experience. It is named after Jacob Mincer.{{Cite journal | last1 = Mincer | first1 = Jacob | year = 1958 | title = Investment in Human Capital and Personal Income Distribution | journal = Journal of Political Economy | volume = 66 | issue = 4 | pages = 281–302 | jstor = 1827422 | doi=10.1086/258055| s2cid = 153616441 }}{{cite book |last=Mincer |first=J. |year=1974 |title=Schooling, Experience and Earnings |location=New York |publisher=National Bureau of Economic Research |isbn=9780870142659 |url=https://books.google.com/books?id=9IGqAAAAIAAJ }} Thomas Lemieux argues it is "one of the most widely used models in empirical economics". The equation has been examined on many datasets. Typically the logarithm of earnings is modelled as the sum of years of education and a quadratic function of "years of potential experience".Lemieux, Thomas. (2006) [https://books.google.com/books?id=FeCS-vRhp9AC&pg=PA127 "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.{{cite journal |last1=Heckman |first1=James J. |first2=Lance J. |last2=Lochner |first3=Petra E. |last3=Todd|author3-link=Petra Todd |year=2003 |title=Fifty Years of Mincer Earnings Regressions |journal=NBER Working Paper No. 9732 |doi=10.3386/w9732 |s2cid=153064304 |doi-access=free }}

:$\backslash ln\; w\; =\; f\; (s,\; x)\; =\; \backslash ln\; w\_0\; +\; \backslash rho\; s\; +\; \backslash beta\_1\; x\; +\; \backslash beta\_2\; x^2$

Where the variables have the following meanings; $w$ is earnings (the intercept $w\_0$ is the earnings of someone with no education and no experience); $s$ is years of schooling; $x$ is years of potential labour market experience. The parameters $\backslash rho$, and $\backslash beta\_\{1\}$, $\backslash beta\_\{2\}$ can be interpreted as the returns to schooling and experience, respectively.

Sherwin Rosen, in his article celebrating Mincer's contribution, memorably noted that when data was interrogated using this equation one might describe them as having been Mincered.{{Cite journal | last1 = Rosen | first1 = Sherwin | year = 1992 | title = Distinguished Fellow: Mincering Labor Economics | journal = Journal of Economic Perspectives | volume = 6 | issue = 2 | pages = 157–170 | jstor = 2138414 | doi=10.1257/jep.6.2.157| doi-access = free }}