Mincer earnings function

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The Mincer earnings function is a single-equation model that explains wage income as a function of schooling and experience, named after Jacob Mincer. The equation has been examined on many datasets and Thomas Lemieux argues it is "one of the most widely used models in empirical economics". Typically the logarithm of earnings is modelled as the sum of years of education and a quadratic function of "years of potential experience".

${\displaystyle \ln w=f(s,x)=\ln w_{0}+\rho s+\beta _{1}x+\beta _{2}x^{2}}$

Where the variables have the following meanings; ${\displaystyle w}$ is earnings (the intercept ${\displaystyle w_{0}}$ is the earnings of someone with no education and no experience); ${\displaystyle s}$ is years of schooling; ${\displaystyle x}$ is years of potential labour market experience. The parameters ${\displaystyle \rho }$, and ${\displaystyle \beta _{1}}$, ${\displaystyle \beta _{2}}$ can be interpreted as the returns to schooling and experience, respectively.

Sherwin Rosen, in his article celebrating Mincer's contribution, memorably noted that when data was interrogated using this equation one might describe them as having been Mincered.

Video Mincer earnings function

References

Maps Mincer earnings function

Further reading

• Borjas, George J. (2000). Labor Economics (Second ed.). New York: McGraw-Hill. pp. 264-266. ISBN 0-07-231198-3. 
• Cahuc, Pierre; Carcillo, Stéphane; Zylberberg, André (1992). Labor Economics (2nd ed.). Cambridge: The MIT Press. pp. 230-244. ISBN 978-0-262-02770-0. 
• Heckman, J.; Lochner, L.; Todd, P. (2006). "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond". Handbook of the Economics of Education. 1. Amsterdam: North-Holland. pp. 307-458. doi:10.1016/S1574-0692(06)01007-5. ISBN 0-08-046566-8. 
• Polachek, Solomon W. (2007). "Earnings Over the Lifecycle: The Mincer Earnings Function and Its Applications" (PDF). IZA Discussion Paper No. 3181. 

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