Separating Uncertainty from Heterogeneity in Life Cycle Earnings
Posted: 29 Feb 2008
Date Written: April 2005
This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60% of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance.
JEL Classification: C33; D84; I21
Suggested Citation: Suggested Citation