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Title: Wage Dynamics and Unobserved Heterogeneity: Time Preference or Learning Ability?
Resulting in 1 citation.
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Munasinghe, Lalith Roshan Sicherman, Nachum |
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Wage Dynamics and Unobserved Heterogeneity: Time Preference or Learning Ability? NBER Working Paper No. 11031, National Bureau of Economic Research, 2005. Also: http://papers.nber.org/papers/w11031.pdf Cohort(s): NLSY79 Publisher: National Bureau of Economic Research (NBER) Keyword(s): Heterogeneity; Modeling; Wage Differentials; Wage Growth; Wage Rates 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. Data are from the National Longitudinal Survey of Youth are used to test their model. They find that the interaction term in their equations are negative, that the result supports the time preference alternative, and that the result is robust across several model specifications and controls. Thus, they conclude that research on the sources of individual discount rates would be a fruitful direction for wage research to follow. |
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Bibliography Citation
Munasinghe, Lalith Roshan and Nachum Sicherman. "Wage Dynamics and Unobserved Heterogeneity: Time Preference or Learning Ability?" NBER Working Paper No. 11031, National Bureau of Economic Research, 2005. |