Lifecycle wages and human capital investments: selection and missing data

Abstract

We derive wage equations with individual specific coefficients from a structural model of human capital investments over the life-cycle. This model allows for interruptions in labor market participation, and addresses missing data and attrition issues. We further control for selection in a flexible way by using interactive effects. Estimation is based on long administrative panel data of male wages in the private sector in France. A structural function approach shows that interruptions negatively affect average wages. More surprisingly, they also negatively affect the inter-decile range of wages after twenty years, and this is due to interruptions being endogenous.