Micro Foundations of Earnings Differences

80 Pages Posted: 31 Aug 2017

See all articles by Tirthatanmoy Das

Tirthatanmoy Das

Temple University; University of Central Florida - College of Business Administration - Department of Economics; IZA

Solomon W. Polachek

State University of New York at Binghamton; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

This paper examines how human capital based approaches explain the distribution of earnings. It assesses traditional, quasi-experimental, and new micro-based structural models, the latter of which gets at population heterogeneity by estimating individual-specific earnings function parameters. The paper finds one's ability to learn and one's ability to retain knowledge are most influential in explaining earnings variations. Marketable skills actually acquired in school depend on these two types of ability. However, schools may also implement ability enhancing interventions which can play a role in improving learning outcomes. Policy initiatives that improve these abilities would be a possible strategy to increase earnings and lower earnings disparity.

Keywords: earnings distribution, human capital, heterogeneity, ability

JEL Classification: I3, J3, J7

Suggested Citation

Das, Tirthatanmoy and Polachek, Solomon W., Micro Foundations of Earnings Differences. IZA Discussion Paper No. 10922, Available at SSRN: https://ssrn.com/abstract=3029792

Tirthatanmoy Das (Contact Author)

Temple University

No Address Available

University of Central Florida - College of Business Administration - Department of Economics ( email )

Orlando, FL 32816-1400
United States

IZA ( email )

Solomon W. Polachek

State University of New York at Binghamton ( email )

Binghamton, NY 13902-6000
United States
607-777-2144 (Phone)
607-777-4900 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

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

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