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Language fluency and earnings : estimation with misclassified language indicators

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Author Info
Dustmann, C.
Soest, A. van (Tilburg University, Center for Economic Research)

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Abstract

We use panel data from the German Socio Economic Panel to estimate the determinants of language uency of immigrants, and its impact on earnings. Self reported measures of language proficiency contain substantial reporting errors. We specify a panel data model which takes explicitly account of misclassification. We extend the existing literature on misclassification of categorical dependent variables by distinguishing between time persistent and time varying misclassification errors, using panel data. The repeated information on language fluency allows us also to distinguish between cohort effects and exposure effects. We then add a wage equation to the model and estimate it jointly with the speaking fluency equation. In this way, we take account of the two problems that may bias OLS estimates: misclassification errors and correlated unobserved individual heterogeneity in wages and speaking uency. We find that both have important consequences for the estimated effect of speaking fluency on earnings.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 120.

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Date of creation: 1998
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Handle: RePEc:dgr:kubcen:1998120

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

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  1. Chiswick, Barry R & Miller, Paul W, 1995. "The Endogeneity between Language and Earnings: International Analyses," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 246-88, April. [Downloadable!] (restricted)
  2. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December. [Downloadable!] (restricted)
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