Human capital and earnings in Portugal

Evidence is presented on the determinants of labor market earnings in the Portuguese work force. Using a large microdata set, we estimate basic and expanded Mincerian earnings functions for the total and various segments of the Portuguese work force. Rates of return to schooling, tenure and experience are estimated. The results are consistent with expectations and with those found for other countries of similar development. We also present evidence on the rates of return to surplus education and undereducation in Portugal. Decomposing gender and employment-sector earnings differentials into “attribute effects” and “price effects” reveals that price effects are more important than attribute effects in explaining gender and employment-sector earnings differences. The results of a test of regional labor market differences suggest that labor markets appear to be geographically in disequilibrium; the rate of return to various regressors including schooling, tenure and experience have not equilibrated across regions.