Unobserved Heterogeneity and Risk in Wage Variance: Does Schooling Provide Earnings Insurance?

33 Pages Posted: 1 Mar 2011

See all articles by Jacopo Mazza

Jacopo Mazza

University of Amsterdam

Hans van Ophem

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Abstract

We apply a recently proposed method to disentangle unobserved heterogeneity from risk in returns to education. We replicate the original study on US men and extend to US women, UK men and German men. Most original results are not robust. A college education cannot universally be considered an insurance against unpredictability of wages. One conclusion is unequivocally confirmed: uncertainty strongly dominates unobserved heterogeneity.

Keywords: wage inequality, wage uncertainty, unobserved heterogeneity, selectivity, education, replication

JEL Classification: C01, C33, C34, J31

Suggested Citation

Mazza, Jacopo and van Ophem, Hans and Hartog, Joop, Unobserved Heterogeneity and Risk in Wage Variance: Does Schooling Provide Earnings Insurance?. IZA Discussion Paper No. 5531. Available at SSRN: https://ssrn.com/abstract=1771253

Jacopo Mazza (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Hans Van Ophem

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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