<p>True that, in principle, we can approximate potential experience by age - schooling and that this is bound to depend on the assumptions made on entry into the labor market.</p>
<p>For the US, it seems to me that many authors (see for example <a href="https://www.jstor.org/stable/25053941#metadata_info_tab_contents" rel="nofollow noreferrer">Borjas (2003)</a>, <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1542-4774.2011.01052.x" rel="nofollow noreferrer">Ottaviano and Peri (2012)</a> <a href="https://www.sciencedirect.com/science/article/pii/S092753711930079X" rel="nofollow noreferrer">Edo and Rapoport (2019)</a>) use the following rule for labor market entry</p>
<ul>
<li>17 for high-school drop outs</li>
<li>19 for high-school graduates with no collge</li>
<li>21 for high-school graduates with some college</li>
<li>23 for college graduates</li>
</ul>
<p>and then calculate the difference between that and age as potential labor market experience. Frequently experience is grouped into 5-year bins, but I guess that decision depends on the number of observations in each bin.</p>

CC BY-SA 4.0
2022-11-26T13:53:22.297Z
2022-11-26T13:53:22.297Z
Papayapap
<p>Wikipedia specifies the Mincer equation like this:</p>
<p><span class="math-container">$$\ln w = \ln w_0 + \rho s + \beta_1 x + \beta_2 x^2$$</span></p>
<p>and states that <span class="math-container">$w$</span> is wage, <span class="math-container">$s$</span> is years of schooling and <span class="math-container">$x$</span> is <strong>potential</strong> experience.</p>
<p>Because it is potential experience, I believe there might be a lot of different interpretations of it.</p>
<p>One possibility that came to my mind is using (age - years of schooling). But one problem with it is that it assumes people cannot work while studying. Another possibility is simply using (age - legal minimum age of employment) or simply age (just an affine transformation of the previous so it shouldn't affect our results), assuming that anyone above the legal minimum age could have potentially worked, regardless of whether they actually worked or not.</p>
<p>How is it actually proxied in the literature? Is there any widely used proxy for this? What are the justifications?</p>

<labor-economics><applied-econometrics><wages><education-economics>
How is potential experience usually measured in the Mincer equation?
Ishan Kashyap Hazarika
# How is potential experience usually measured in the Mincer equation?

(Asked by: username_0 on 2022-11-26)

Wikipedia specifies the Mincer equation like this:

$$\ln w = \ln w\_0 + \rho s + \beta\_1 x + \beta\_2 x^2$$

and states that $w$ is wage, $s$ is years of schooling and $x$ is **potential** experience.

Because it is potential experience, I believe there might be a lot of different interpretations of it.

One possibility that came to my mind is using (age - years of schooling). But one problem with it is that it assumes people cannot work while studying. Another possibility is simply using (age - legal minimum age of employment) or simply age (just an affine transformation of the previous so it shouldn't affect our results), assuming that anyone above the legal minimum age could have potentially worked, regardless of whether they actually worked or not.

How is it actually proxied in the literature? Is there any widely used proxy for this? What are the justifications?

**Tags:** labor-economics, applied-econometrics, wages, education-economics


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## 1 answers

### Answer by username_1 on 2022-11-26. Score: 4 | Accepted answer

True that, in principle, we can approximate potential experience by age - schooling and that this is bound to depend on the assumptions made on entry into the labor market.

For the US, it seems to me that many authors (see for example [Borjas (2003)](https://www.jstor.org/stable/25053941#metadata_info_tab_contents), [Ottaviano and Peri (2012)](https://onlinelibrary.wiley.com/doi/full/10.1111/j.1542-4774.2011.01052.x) [Edo and Rapoport (2019)](https://www.sciencedirect.com/science/article/pii/S092753711930079X)) use the following rule for labor market entry

* 17 for high-school drop outs
* 19 for high-school graduates with no collge
* 21 for high-school graduates with some college
* 23 for college graduates

and then calculate the difference between that and age as potential labor market experience. Frequently experience is grouped into 5-year bins, but I guess that decision depends on the number of observations in each bin.


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