Separating Uncertainty from Heterogeneity in Life Cycle Earnings
Working Paper 11024
DOI 10.3386/w11024
Issue Date
This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60% of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance.
Published Versions
Cunha, Flavio, James Heckman and Salvador Navarro. "Separating Uncertainty From Heterogeneity In Life Cycle Earnings," Oxford Economic Papers, 2005, v57(2,Apr), 191-261. citation courtesy of