Working Paper: NBER ID: w11024
Authors: Flavio Cunha; James J. Heckman; Salvador Navarro
Abstract: 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.
Keywords: Earnings; Uncertainty; Heterogeneity; Life Cycle; Education
JEL Codes: C33; D84; I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Forecastable earnings heterogeneity (D29) | Variability in returns to schooling (I26) |
| Unforecastable uncertainty (D89) | Welfare of agents (I30) |
| Market structure and agent preferences (D49) | Predictability of earnings outcomes (G17) |
| Predictability of earnings (G17) | Welfare of agents (I30) |