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Empirical Age-Earnings Profiles

Kevin M. Murphy and Finis Welch
Journal of Labor Economics
Vol. 8, No. 2 (Apr., 1990), pp. 202-229
Stable URL: http://www.jstor.org/stable/2535096
Page Count: 28
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Empirical Age-Earnings Profiles
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Abstract

The "human capital earnings function," in which earnings are expressed as a quadratic in potential experience, is probably the most widely accepted empirical specification in economics. In spite of its widespread acceptance, the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience. The standard formulation understates early career earnings growth by about 30%-50% and overstates midcareer growth by 20%-50%. However, simple alternative specifications that fit the data are available.

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