Jacob Mincer IZA Prize in Labor Economics Series Since 2002, the Institute for the Study of Labor (IZA) has awarded the annual IZA Prize in Labor Economics for outstanding contributions to policy-relevant labor market research and methodological progress in this sub-discipline of economic science. The IZA Prize is the only international science prize awarded exclusively to labor economists. This special focus acknowledges the global significance of high-quality basic research in labor economics and sound policy advice based on these research find- ings. As issues of employment and unemployment are among the most urgent challenges of our time, labor economists have an important task and responsibility. The IZA Prize in Labor Economics is today considered one of the most prestigious international awards in the field. It aims to stimulate further research on topics that have enormous implications for our future. All prize-winners contribute a volume to the IZA Prize in Labor Economic Series published by Oxford University Press, which has been established to provide an overview of the laureates’ most significant findings. The IZA Prize in Labor Economics has become an integral part of the insti- tute’s manifold activities to promote progress in labor market research. Based on nominations submitted by the IZA Research Fellows, a high- ranking IZA Prize Committee including several Nobel laureates selects the prize-winner. In conjunction with the official award ceremony, which takes place in Berlin each year, the IZA Prize Conference brings together a number of renowned experts to discuss topical labor market issues. It is not by coincidence that the IZA Prize in Labor Economics Series is published by Oxford University Press. This well-reputed publishing house has shown a great interest in the project from the very beginning as this exclusive series perfectly complements their range of publications. We gratefully acknowledge their excellent cooperation. Bonn, January 2007 Klaus F. Zimmermann IZA Director Winners of the IZA Prize in Labor Economics 2006 David Card, University of California, Berkeley, and Alan Krueger, Princeton University 2005 Dale Mortensen, Northwestern University, and Christopher Pis- sarides, London School of Economics 2004 Edward Lazear, Stanford University 2003 Orley Ashenfelter, Princeton University 2002 Jacob Mincer, Columbia University Jacob Mincer 1922–2006 Jacob Mincer A Founding Father of Modern Labor Economics Pedro N. Teixeira 1 3 Great Clarendon Street, Oxford ox2 6DP Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York © IZA, 2007 The moral rights of the author have been asserted Database right Oxford University Press (maker) First published 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose the same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Data available Typeset by SPI Publisher Services, Pondicherry, India Printed in Great Britain on acid-free paper by Biddles Ltd., King’s Lynn, Norfolk ISBN 978–0–19–921131–9 13579108642 Dedicated to the Memory of Jacob Mincer Foreword This first volume of the IZA Prize in Labor Economics Series is unique in many respects. It is the first comprehensive account of the lifetime achievement of the great pioneer in labor economics, Jacob Mincer, who won the first IZA Prize in 2002. The volume is authored by the Portuguese economist Pedro T. Teixeira, a veritable expert on Mincer and his work. Remarkably, Jacob Mincer was always available to the author for many enlightening discussions that made this exceptional volume possible. Depicting Mincer’s varied research activities against the background of an eventful life, this book is a necessity for every- one interested in the development of what has become the standard toolset of today’s labor economists. After thoroughly preparing this important contribution, we are deeply saddened that Jacob Mincer did not live to see it published. At the age of 84, he passed away in his New York home on August 20, 2006. He will be sorely missed. But his extraordinary lifetime achievement, as described in this volume, will long be remembered. Bonn, January 2007 Klaus F. Zimmermann IZA Director vi Award Letter The IZA Prize in Labor Economics 2002 is awarded to one of the most influential labor economists of our time, Jacob Mincer (Professor Emeritus at Columbia University, New York), for his fundamental contributions to the field. In a series of pioneering studies, Mincer showed the power of price theory in organizing and interpreting bewildering and appar- ently contradictory empirical evidence on differences in wages across persons and on patterns of female labor supply. His creative use of economic theory applied to interpret data on households and the labor market helped to transform labor economics into one of the major scientific fields in economics. His work is a paragon of empirical science in economics. Jacob Mincer’s scholarly contributions fall into two main cate- gories. Mincer was a leading member of a group of economists at Columbia University and the University of Chicago who systemati- cally developed the empirical foundations of human capital. His 1958 Journal of Political Economy article showed the power of the concept of equalizing differences in explaining earnings inequality due to edu- cation. His 1962 Journal of Political Economy paper presented the first systematic empirical analysis of learning on the job as a determinant of life cycle wage growth. His magisterial Schooling, Experience and Earnings (1974) showed the power of the human capital investment concept in accounting for diverse patterns of earnings inequality and wage growth over the life cycle. He demonstrated the empir- ical importance of complementarity in skill formation—that skill begets—skill and that more educated people do more post-schooling investment in learning. This research established the Mincer earnings function as a widely used and widely replicated cornerstone for inter- preting earnings data in many fields of economics. His subsequent work on job turnover, on the measurement of firm specific training, vii Award Letter on investment responses to technology change and in accounting for the recent rise in wage inequality within an economic framework, enrich the basic model and show its analytical and empirical power. Jacob Mincer also pioneered the study of female labor supply and the economics of the household. His seminal 1962 paper on the labor supply of married women showed that accounting for the influence of the price of time on labor—the market wage—explains why female labor supply increased at the same time real wealth of society was increasing. That work, and a subsequent 1963 paper, showed the importance of accounting for the household choices women face in explaining female labor supply and fertility. This research helped to foster the emergence of household economics as a separate inde- pendent field. Mincer’s insights on labor supply, human capital and fertility helped lay the foundations for understanding how economic development transforms the role of women and the family. Professor Mincer also played a major role in transforming labor economics into an analytical field through his teaching and his par- ticipation in the legendary Labor Workshop at Columbia University. Led and inspired by Jacob Mincer the students and faculty associated with that workshop went on to revolutionize labor economics. Jacob Mincer is the founding father of modern empirical labor economics. His efforts in developing the scientific instruments and methods used by today’s economists to analyze the problems and prospects of the working world are almost unparalleled. The IZA Prize in Labor Economics 2002 honors the life-time achievement of an outstanding scholar and pioneer in labor market research. George A. Akerlof University of California, Berkeley Gary S. Becker University of Chicago James J. Heckman University of Chicago Gerard Pfann Maastricht University Klaus F. Zimmermann IZA and University of Bonn viii Preface This book originated through a kind offer by IZA to write a book that could provide a general and comprehensive overview of the richness and complexity of Jacob Mincer’s lifetime contribution to economic analysis. IZA’s generous invitation provided me with a unique opportunity to pursue my long-time interest in Mincer’s work. Back in 1997, I became interested in studying the historical roots and development of human capital research (Teixeira 2000) and started to explore the fascinating work of Jacob Mincer. My interest in studying the development of the human capital research program became the central theme of my doctoral dissertation (Teixeira 2003), which I finished in June 2003 at the University of Exeter, under the supervision of Mark Blaug and John Maloney. During my doctoral research I decided that it would be a good idea to talk to some of the leading academics who had launched that research program.