Using Longitudinal Data to Estimate Age, Period and Cohort Effects in Earnings Equations

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Abstract

The literature on the determinants of earnings suggest an earnings function for individual i which depends on age ai, year t, “vintage” or “cohort” schooling level si, and experience ei. Adopting a linear function to facilitate exposition we may write (1) $${Y_i}(t,{a_i},{c_i},{e_i},{s_i}) = {\alpha _0} + {\alpha _1}{a_i} + {\alpha _2}t + {\alpha _3}{e_i} + {\alpha _4}{s_i} + {\alpha _5}{c_i}$$ where ei is experience, usually defined for males as age minus schooling, (ei = ai – si),1 and Yi may be any monotone transformation of earnings.