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Comparing Estimation Strategies for Income Equations in the Presence of Panel Attrition, Empirical Results Based on the ECHP

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  • Andreas Behr

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    (Universitaet Muenster)

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    Abstract

    Since attrition in the European Community Household Panel (ECHP) has cumulated to a considerable extent, there is concern that attrition biases empirical analysis. In this paper we compare the performance of four different strategies for estimating an earnings equation in the presence of panel attrition. By splitting the completely observed sample in one wave according to the response behavior of the following wave, we assess empirically the bias of an un-weighted, an inverse probability weighted, a Heckman and a matching estimator through bootstrap methods. Our findings lead us to several conclusions. First, for the example of Mincerian earnings equations, attrition is no matter of great concern when using the ECHP data. Second, the three estimation strategies, which correct for attrition based on estimated response probabilites, reduce the number of signigicantly biased parameters. Third, the correction strategies strongly increase the variance of the estimates throuhg relying on estimated response probabilities and increase the relative bias. Hence, the reduction of significant biases is rather due to increased variance than due to lower biases. This result is confirmed when comparing the mean square error of the different estimation techniques. Therefore, for the estimation of inocme equations the uncorrected estimation based on respondents is suggested as the superior estimation strategy.

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    Bibliographic Info

    Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

    Volume (Year): 226 (2006)
    Issue (Month): 4 (July)
    Pages: 361-384

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    Handle: RePEc:jns:jbstat:v:226:y:2006:i:4:p:361-384

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    Related research

    Keywords: Earnings equation; panel attrition; ECHP;

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    1. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
    2. John Fitzgerald & Peter Gottschalk & Robert Moffitt, 1997. "An Analysis of Sample Attrition in Panel Data: The Michigan Panel Study of Income Dynamics," Boston College Working Papers in Economics 394, Boston College Department of Economics.
    3. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
    4. Mincer, Jacob, 1997. "The Production of Human Capital and the Life Cycle of Earnings: Variations on a Theme," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S26-47, January.
    5. Lee A. Lillard & Constantijn W. A. Panis, 1998. "Panel Attrition from the Panel Study of Income Dynamics: Household Income, Marital Status, and Mortality," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 437-457.
    6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    7. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
    8. repec:ese:iserwp:2002-32 is not listed on IDEAS
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