Working Paper: CEPR ID: DP15083
Authors: Thierry Magnac; Sébastien Roux
Abstract: Using data on French male wage employees observed over 30 years, we estimate individual-specific parameters of a human capital investment model by random and fixed effect methods. Individual wage profiles are described by a level, a slope and a curvature. Among the salient results, cross-section inequalities exceed life-cycle inequalities by a factor increasing from 20% to 80%, and permanent heterogeneity explains between 60 and 90% of the variance of wages. Multidimensional heterogeneity, and in particular the heterogeneous curvature of individual profiles, is found to be necessary to properly describe the stochastic process of wages over the life-cycle.
Keywords: Human Capital Investment; Inequality; Wage Dynamics; Post-Schooling Wage Growth; Random and Fixed Effects
JEL Codes: C33; D91; I24; J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cross-sectional inequalities in wages (J31) | permanent heterogeneity (F12) |
| permanent heterogeneity (F12) | wage variance (J31) |
| multidimensional heterogeneity (C31) | stochastic nature of wages (J39) |
| curvature of individual wage profiles (J31) | wage dynamics (J31) |
| initial wage level (J31) | subsequent wage growth (J31) |
| subsequent wage growth (J31) | curvature of wage profiles (J31) |