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

Arbeitspapier

A large fraction of the variation in wage levels and wage growth rates among individuals remains unexplained. Economists argue that ?unobserved? heterogeneity is among the more likely reasons for this unexplained variation in wages. The source of individual heterogeneity is typically attributed to data limitations and the unobservability of certain productivity related factors. In this paper we present a theory of career choice and derive a discriminating test between two inherently unobservable sources of heterogeneity – learning ability and workers? inter-temporal preferences (discounting) – both of which can clearly account for the variation in wage levels and wage growth rates. We apply this test to the large observed differences in wages and wage growth rates between smokers and non-smokers. The empirical evidence suggests that smoking is a proxy for individual discount rates.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 1436

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Time Allocation and Labor Supply
• Thema: wage dynamics ; unobserved heterogeneity ; discount rates ; learning ability ; Lohnstruktur ; Zeitpräferenz ; Abzinsung ; Lernen ; Rauchen ; Schätzung ; Vereinigte Staaten

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Munasinghe, Lalith ; Sicherman, Nachum
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/20734
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ