Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71649
Authors: 
Richter, Wolfram F.
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7280
Abstract: 
The basis for the empirical research on earnings determination is the Mincer equation. Individuals are assumed to make schooling decisions by maximizing earnings. Leisure costs of schooling and labour supply are neglected which has some empirically implausible implications. This paper shows a way of deriving a Mincer-type earnings function from the more standard assumption of utility maximization. The implications are less questionable. The approach allows one to analyse the efficiency of education policy in Ramsey's tradition. Distortive wage taxation is shown to provide reason for subsidizing education in effective terms. Second-best policy is confronted with empirical evidence on OECD countries.
Subjects: 
Mincer equation
earnings determination
maximizing utility vs. earnings
power law of learning
second-best taxation in Ramsey's tradition
education elasticity rule
JEL: 
J24
H21
I28
Document Type: 
Working Paper

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