The “Mincer Equation” Thirty Years After Schooling, Experience, and Earnings

Abstract

This paper evaluates the empirical performance of the standard Mincer earnings equation thirty years after the publication of Schooling, Experience and Earnings. Over this period, there has been a dramatic expansion in micro data and estimation techniques available to labor economists. How does the Mincer equation stand in light of these advances in empirical labor economics? Is it time to revise our benchmark model? On the basis of the existing literature and some new empirical estimates, I conclude that the Mincer equation remains an accurate benchmark for estimating wage determination equations provided that it is adjusted by (1) including a quartic function in potential experience instead of just a quadratic, (2) allowing for a quadratic term in years of schooling to capture the growing convexity in the relationship between schooling and wages, and (3) allowing for cohort effects to capture the dramatic growth in returns to schooling among cohorts born after 1950.

An early version of this paper was prepared for an invited lecture at the Journées de la microéconomie appliquée at Université Laval, June 8 2000. I would like to thank Bernard Fortin for inviting me to present this lecture. I would also like to thank David Card, Nicole Fortin, Shoshana Grossbard, James Heckman, and an anonymous referee for useful comments, and SSHRC, FCAR, NIHCD (1 R01 HD39921-01) and the Center for Labor Economics (UC Berkeley) for financial support