Mincer earnings function explained

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.^{[1] [2]} 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".^{[3] [4]}

ln w = f (s, x) = ln w _{0} + \rho s + \beta _{1} x + \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 \rho , and \beta _{1} , \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.^[5]

Further reading

• Anders . Björklund . Christian . Kjellström . Estimating the return to investments in education: how useful is the standard Mincer equation? . Economics of Education Review . 21 . 3 . 2002 . 195–210 . 10.1016/S0272-7757(01)00003-6 .
• Book: Borjas, George J. . George J. Borjas . 264–266 . Labor Economics . New York . McGraw-Hill . 2000 . Second . 0-07-231198-3 . registration .
• Book: Labor Economics . Cahuc . Pierre . Carcillo . Stéphane . Zylberberg . André . The MIT Press . 1992 . 978-0-262-02770-0 . 2nd . Cambridge . 230–244 .
• Book: Heckman . J. . L. . Lochner . P. . Todd . Petra Todd. 2006 . Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond . Handbook of the Economics of Education . 1 . Amsterdam . North-Holland . 307–458 . 0-08-046566-8 . https://books.google.com/books?id=UV85fbBA6zMC&pg=PA307 . 10.1016/S1574-0692(06)01007-5 .
• Polachek . Solomon W. . Earnings Over the Lifecycle: The Mincer Earnings Function and Its Applications . IZA Discussion Paper No. 3181 . 2007 .

Notes and References

1. Mincer . Jacob . 1958 . Investment in Human Capital and Personal Income Distribution . . 66 . 4 . 281–302 . 1827422 . 10.1086/258055. 153616441 .
2. Book: Mincer, J. . 1974 . Schooling, Experience and Earnings . New York . National Bureau of Economic Research . 9780870142659 .
3. 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. Heckman . James J. . Lance J. . Lochner . Petra E. . Todd. Petra Todd . 2003 . Fifty Years of Mincer Earnings Regressions . NBER Working Paper No. 9732 . 10.3386/w9732 . 153064304 . free .
5. Rosen . Sherwin . 1992 . Distinguished Fellow: Mincering Labor Economics . . 6 . 2 . 157–170 . 2138414 . 10.1257/jep.6.2.157. free .