An essay on the factors of income

Abstract

This paper examines the effect of different factors on the composition of individuals earning by using the Panel Study of Income Dynamics (PSID) data. This paper also exhibits the contribution of individual’s non-cognitive skills and first occupation on yearly real earning. The contribution towards the literature of this paper is few ways; finding real change in income due to different factors; using different categories of occupation to estimate the result; developing ability index to measure the non-cognitive skill. The result finds a strong effect of education on individuals' earnings. The result also shows other factor’s importance on individual earnings and finds evidence of the contribution of first occupation and noncognitive ability on real earnings.