Article ID Journal Published Year Pages File Type
972363 Labour Economics 2014 10 Pages PDF
Abstract

•We estimate moments of lifetime income by level of education using a 22-year panel.•We find large differences in mean lifetime income by education in Finland.•We adjust mean differences for variance and skew.•Adjusted differences are no smaller.

Human capital investments increase lifetime income, but may involve substantial risk. In this paper we use a Finnish panel spanning 22 years to nonparametrically predict the mean, the variance and the skew of the present value of lifetime income, and to calculate certainty equivalent lifetime income at different levels of education. We find that university education is associated with about a half a million euro increase in discounted lifetime disposable income compared to vocational high school. Accounting for risk does little to change this picture. By contrast, vocational high school is associated with only moderately higher lifetime income compared to compulsory education, and the entire difference is due to differential nonemployment.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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