Wage Dynamics and Unobserved Heterogeneity: Time Preference of Learning Ability?

Lalith Munasinghe () and Nachum Sicherman

No 11031, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A large portion of the variation in wages and wage growth rates among individuals is due to "unobserved" heterogeneity, and the source of individual heterogeneity is typically attributed to data limitations and/or the unobservability of certain productivity related factors. In this paper we develop a test that discriminates between two inherently unobservable sources of heterogeneity (both of which can clearly account for the variation in wages and wage growth rates): learning ability and workers' inter-temporal preferences (discounting). We apply this test to the large observed differences in wages and wage growth rates between smokers and non-smokers. The evidence supports the discounting hypothesis.

JEL-codes: J22 J24 J31 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-lab
Note: LS
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Citations: View citations in EconPapers (4)

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Working Paper: Wage Dynamics and Unobserved Heterogeneity: Time Preference or Learning Ability? (2004)
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