Year: 1973
Type: report
Study design: Observational Study
Abstract: The fine structure of earnings is defined by a theoretically meaningful decomposition of the covariance matrix of earnings (or log earnings) time series. A three-element variance components model is proposed for analyzing earnings of young workers. These components are interpreted as the effects of differential on-the-job training (OJT) and differential economic ability. Several properties of these components and relationships between them are deduced from the OJT model. Background noise generated by a nonstationary first-order autoregressive process, with heteroscedastic innovations and time-varying AR parameters is also assumed present in observed earnings. ML estimates are obtained for all parameters of the model for a sample of Swedish males. The results are consistent with the view that the OJT mechanism is an empirically significant phenomenon in determining individual earnings profiles.
DOI: 10.3386/w0025
Author: John Hause
Institutions: University of Minnesota, National Bureau of Economic Research
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1545042760