Discount rate or learning curve?
This article examines a working paper on wage dynamics and unobserved heterogeneity. The paper suggests there are two general classes of heterogeneity: differences in individual productivity and differences in individual preferences. The relationship between smoking and wages might reflect differenc...
| Published in: | Monthly Labor Review Vol. 128; no. 4; p. 48 |
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| Format: | Article |
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US Department of Labor
Apr2005
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| Summary: | This article examines a working paper on wage dynamics and unobserved heterogeneity. The paper suggests there are two general classes of heterogeneity: differences in individual productivity and differences in individual preferences. The relationship between smoking and wages might reflect differences in time preference or learning ability. The test of which is the more important factor is constructed on the basis of the theoretical implications of time preference and learning ability--the correlation between the individuals starting wage and subsequent wage growth will be very different. The negative correlation between first wage and wage growth is stronger among smokers if learning ability is held constant. |
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