An Assessment of the Relevance of the Mincerian Equation: The Case of Mauritius

Abstract

This paper assesses the relevance of the Mincerian Equation in Mauritius. Using CMPHS data, the basic equation is augmented to cater for wage responsiveness to changes across different schooling levels. However, the use of the standard linear regression method does not take into consideration the endogeneity of the variable years of schooling and sample selection bias. The IV2SLS Method is adopted, using region as an instrument. The Heckit model is further adopted to address the problem of sample selection bias. This study also employs pseudo panel models as an alternative to IV2SLS as a weak instrument may significantly impact results.

Keywords

• Pooled OLS
• Endogeneity
• Pseudo-panel
• Returns to education
• Mincerian equation
• Mauritius