Empirical Age-Earnings Profiles

Kevin Murphy and Finis Welch

Journal of Labor Economics, 1990, vol. 8, issue 2, 202-29

Abstract: The "human capital earnings function," in which earnings are expressed as a quadratic in potential experience, is probably the most widely accepted empirical specification in economics. In spite of its widespread acceptance, the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience. The standard formulation understates early career earnings growth by about 30 percent-50 percent and overstates midcareer growth by 20 percent-50 percent. However, simple alternative specifications that fit the data are available. Copyright 1990 by University of Chicago Press.

Date: 1990
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