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Movin on up: interpreting the earnings experience profile

Manning, Alan (1998) Movin on up: interpreting the earnings experience profile. CEPDP, 380. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753012065

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Abstract

Human capital theory provides the generally accepted interpretation of the relationship between earnings and labour market experience, namely that general human capital tends to increase with experience. However, there are other plausible interpretations e.g. search models generally predict that more time in the labour market increases the chance of finding a better match and hence tends to be associated with higher earnings. In this paper we show how a simple search model can be used to predict the amount of earnings growth that can be assigned to search with the residual being assigned to the human capital model. We show how a substantial if not the larger part of the rise in earnings over the life-cycle in Britain can be explained by a simple search model and that virtually all the earnings gap between men and women can be explained in this way. Overall, the evidence suggests that we do need to rethink our interpretation of the returns to experience in earnings functions.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1998 Alan Manning
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 380
Date Deposited: 01 Aug 2008 09:58
URL: http://eprints.lse.ac.uk/20294/

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