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The Inconsistency of the Quadratic Mincer Equation: A Proof
School of Management, State University of New York at Buffalo, Buffalo, USA
- 1 School of Management, State University of New York at Buffalo, Buffalo, USA
Theoretical Economics Letters·Volume 02 (2012)·Pages 115–120·Published 23 May 2012·DOI10.4236/tel.2012.22021
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Abstract
This paper provides a proof that the well-known quadratic Mincer (1974) Equation, wherein the log of wage or salary is a quadratic function of the years of experience, is inconsistent with the usual assumptions of utility maximization. The proof requires the use of the dynamic version of the Mincer Equation and the assumption of an isoelastic marginal utility function. The result is that a polynomial of degree three or greater is required to relate the log of wage or salary to the number of years of experience.
KeywordsMincerSalaryContinuing EducationOptimal Control
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