Factors Affecting Earnings : A Research on American Data

Sammanfattning: During a lifetime an individual is faced with the decision whether or not to pursue additional years of education, and one may ask if this will generate some sort of payoff, for example, if higher earnings is to be received later in life. The aim of this paper is to investigate how an individual’s earnings is affected by the amount of years one spends in school and also to see if gender and experience are contributing factors. We will investigate these relationships by first introducing the two theories “Human Capital” and “The Mincer Equation”. These build upon each other and are connected. Thereafter, modifications of the Standard Mincer equation will develop our four different regression equations. These regressions will be run on an American cross-sectional data set, by use of the Ordinary Least Squares (OLS). Our chosen explanatory variables do affect earnings and the specific data set shows that additional years of schooling do increase earnings. We also found a distinct difference in hourly earnings between men and women.