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Matching and semi-parametric IV estimation, a distance-based measure of migration, and the wages of young men

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  • Ham, John C.
  • Li, Xianghong
  • Reagan, Patricia B.
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    Abstract

    Our paper estimates the effect of US internal migration on wage growth for young men between their first and second job. Our analysis of migration extends previous research by: (i) exploiting the distance-based measures of migration in the National Longitudinal Surveys of Youth 1979 (NLSY79); (ii) allowing the effect of migration to differ by schooling level and (iii) using propensity score matching to estimate the average treatment effect on the treated (ATET) for movers and (iv) using local average treatment effect (LATE) estimators with covariates to estimate the average treatment effect (ATE) and ATET for compliers. We believe the Conditional Independence Assumption (CIA) is reasonable for our matching estimators since the NLSY79 provides a relatively rich array of variables on which to match. Our matching methods are based on local linear, local cubic, and local linear ridge regressions. Local linear and local ridge regression matching produce relatively similar point estimates and standard errors, while local cubic regression matching badly over-fits the data and provides very noisy estimates. We use the bootstrap to calculate standard errors. Since the validity of the bootstrap has not been investigated for the matching estimators we use, and has been shown to be invalid for nearest neighbor matching estimators, we conduct a Monte Carlo study on the appropriateness of using the bootstrap to calculate standard errors for local linear regression matching. The data generating processes in our Monte Carlo study are relatively rich and calibrated to match our empirical models or to test the sensitivity of our results to the choice of parameter values. The estimated standard errors from the bootstrap are very close to those from the Monte Carlo experiments, which lends support to our using the bootstrap to calculate standard errors in our setting. From the matching estimators we find a significant positive effect of migration on the wage growth of college graduates, and a marginally significant negative effect for high school dropouts. We do not find any significant effects for other educational groups or for the overall sample. Our results are generally robust to changes in the model specification and changes in our distance-based measure of migration. We find that better data matters; if we use a measure of migration based on moving across county lines, we overstate the number of moves, while if we use a measure based on moving across state lines, we understate the number of moves. Further, using either the county or state measures leads to much less precise estimates. We also consider semi-parametric LATE estimators with covariates (Frölich 2007), using two sets of instrumental variables. We precisely estimate the proportion of compliers in our data, but because we have a small number of compliers, we cannot obtain precise LATE estimates.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 161 (2011)
    Issue (Month): 2 (April)
    Pages: 208-227

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    Handle: RePEc:eee:econom:v:161:y:2011:i:2:p:208-227

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    Web page: http://www.elsevier.com/locate/jeconom

    Related research

    Keywords: US internal migration Propensity score matching LATE;

    References

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    Cited by:
    1. Kantarevic, Jasmin & Kralj, Boris, 2012. "Link between Pay for Performance Incentives and Physician Payment Mechanisms: Evidence from the Diabetes Management Incentive in Ontario," IZA Discussion Papers 6474, Institute for the Study of Labor (IZA).
    2. Krishnan, Pramila & Krutikova, Sofya, 2013. "Non-cognitive skill formation in poor neighbourhoods of urban India," Labour Economics, Elsevier, vol. 24(C), pages 68-85.
    3. de Brauw, Alan & Mueller, Valerie & Woldehanna, Tassew, 2013. "Does internal migration improve overall well-being in Ethiopia?:," ESSP working papers 55, International Food Policy Research Institute (IFPRI).
    4. Mario Liebensteiner, 2012. "Estimating the Income Gain of Seasonal Labour Migration," WIFO Working Papers 430, WIFO.
    5. Eliane El Badaoui & Eric Strobl & Frank Walsh, 2014. "The Impact of Internal Migration on Local Labour Markets in Thailand," Working Papers 2014-071, Department of Research, Ipag Business School.
    6. Ulf Rinne & Arne Uhlendorff & Zhong Zhao, 2013. "Vouchers and caseworkers in training programs for the unemployed," Empirical Economics, Springer, vol. 45(3), pages 1089-1127, December.

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