Lifecycle Wages and Human Capital Investments: Selection and Missing Data

Résumé

We derive wage equations with individual-specific coefficients from a structural model of human capital investment over the life-cycle. This model allows for interruptions in labour market participation and deals with missing data and attrition problems. We propose a new framework that deals with missingness at random and is based on factor decompositions that allow for flexible control of selection. Our approach leads to an interactive effect wage specification, which we estimate using long administrative panel data on male wages in the private sector in France. A structural function approach shows that interruptions negatively affect average wages. Interestingly, they also negatively affect the inter-decile range of wages after twenty years. This is only partly due to the fact that interruptions are endogenous.

Mots-clés

Human capital investment; wage inequalities; factor models; missing data;

Codes JEL

C38: Classification Methods • Cluster Analysis • Principal Components • Factor Models
D91: Intertemporal Household Choice • Life Cycle Models and Saving
I24: Education and Inequality
J24: Human Capital • Skills • Occupational Choice • Labor Productivity
J31: Wage Level and Structure • Wage Differentials