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Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching

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  • Bollinger, Christopher R.

    ()
    (University of Kentucky)

  • Hirsch, Barry

    ()
    (Georgia State University)

Abstract

This paper examines alternative forms of match bias arising from earnings imputation. Wage equation parameters are estimated based on mixed samples of workers who do and do not report earnings, the latter group being assigned earnings of donors who share some but not all the attributes of the recipients. Regressions that include attributes not used as imputation match criteria (e.g., union status) are severely biased. Related forms of match bias arise with respect to attributes used as match criteria, but matched imperfectly. For example, an imperfect match on schooling creates bias that flattens estimated earnings profiles within low, middle, and high education groups, while creating large jumps in returns across groups. The same pattern arises in wage-age profiles. The paper provides a general analytic expression to correct match bias in regression coefficients under the assumption of conditional mean missing at random. The full sample correction approach is compared to the alternative of omitting imputed earners from the sample, with and without reweighting. Additional problems considered are bias in longitudinal analysis and the presence of dated donors.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1846.

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Length: 47 pages
Date of creation: Nov 2005
Date of revision:
Publication status: published in: Journal of Labor Economics, 2006, 24 (3), 483-519
Handle: RePEc:iza:izadps:dp1846

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Keywords: match bias; imputation; CPS; wage equations; measurement error;

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References

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  1. Bollinger, Christopher R., 1996. "Bounding mean regressions when a binary regressor is mismeasured," Journal of Econometrics, Elsevier, vol. 73(2), pages 387-399, August.
  2. Horowitz, Joel L. & Manski, Charles F., 1998. "Censoring of outcomes and regressors due to survey nonresponse: Identification and estimation using weights and imputations," Journal of Econometrics, Elsevier, vol. 84(1), pages 37-58, May.
  3. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Hirsch, Barry & Schumacher, Edward J., 2003. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," IZA Discussion Papers 783, Institute for the Study of Labor (IZA).
  5. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
  6. Molinari, Francesca, 2005. "Missing Treatments," Working Papers 05-11, Cornell University, Center for Analytic Economics.
  7. Hirsch, Barry, 2004. "Why Do Part-Time Workers Earn Less? The Role of Worker and Job Skills," IZA Discussion Papers 1261, Institute for the Study of Labor (IZA).
  8. Lee Lillard & James P. Smith & Finis Welch, 2004. "What Do We Really Know About Wages: The Importance of Nonreporting and Census Imputation," Labor and Demography 0404005, EconWPA.
  9. repec:fth:prinin:462 is not listed on IDEAS
  10. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
  11. Melissa Clark & David Jaeger, 2006. "Natives, the foreign-born and high school equivalents: new evidence on the returns to the GED," Journal of Population Economics, Springer, vol. 19(4), pages 769-793, October.
  12. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
  13. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
  14. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  15. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
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Citations

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Cited by:
  1. James T. Bang & Aniruddha Mitra, 2009. "Brain Drain and Institutions of Governance: Educational Attainment of Immigrants to the US 1988-2000," Middlebury College Working Paper Series 0919, Middlebury College, Department of Economics.
  2. Klapper, Leora & Lusardi, Annamaria & Panos, Georgios A., 2013. "Financial literacy and its consequences: Evidence from Russia during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3904-3923.
  3. Hirsch, Barry, 2013. "An Anatomy of Public Sector Unions," IZA Discussion Papers 7313, Institute for the Study of Labor (IZA).
  4. Liu, Long, 2009. "On hourly wages and weekly earnings in the current population survey," Economics Letters, Elsevier, vol. 105(1), pages 113-116, October.
  5. Orrenius, Pia M. & Zavodny, Madeline, 2014. "How do e-verify mandates affect unauthorized immigrant workers?," Working Papers 1403, Federal Reserve Bank of Dallas.
  6. Christopher R. Bollinger & Barry T. Hirsch, 2013. "Is Earnings Nonresponse Ignorable?," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 407-416, May.
  7. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30749, University Library of Munich, Germany, revised 06 May 2011.
  8. Even, William E. & Macpherson, David A., 2009. "Is Bigger Still Better? The Decline of the Wage Premium at Large Firms," IZA Discussion Papers 4082, Institute for the Study of Labor (IZA).
  9. Emily Isenberg & Liana Christin Landivar & Esther Mezey, 2013. "A Comparison Of Person-Reported Industry To Employer-Reported Industry In Survey And Administrative Data," Working Papers 13-47, Center for Economic Studies, U.S. Census Bureau.
  10. Hirsch, Barry, 2007. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," IZA Discussion Papers 2930, Institute for the Study of Labor (IZA).
  11. Molly Dahl & Thomas DeLeire & Shannon Mok, 2012. "Food Insufficiency and Income Volatility in U.S. Households: The Effects of Imputed Earnings in the Survey of Income and Program Participation: Working Paper 2012-07," Working Papers 43137, Congressional Budget Office.
  12. Hirsch, Barry & Schumacher, Edward J., 2008. "Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes," IZA Discussion Papers 3833, Institute for the Study of Labor (IZA).
  13. Ziliak, James P. & Hardy, Bradley & Bollinger, Christopher, 2011. "Earnings volatility in America: Evidence from matched CPS," Labour Economics, Elsevier, vol. 18(6), pages 742-754.
  14. Christopher R. Bollinger & Barry T. Hirsch, 2010. "GDP & Beyond – die europäische Perspektive," Working Paper Series of the German Council for Social and Economic Data 165, German Council for Social and Economic Data (RatSWD).
  15. Rodriguez-Oreggia, Eduardo & Lopez-Videla, Bruno, 2014. "Imputación de ingresos laborales: Una aplicación con encuestas de empleo en México
    [Labor earnings imputation: An application using labor surveys in Mexico]
    ," MPRA Paper 54436, University Library of Munich, Germany.
  16. Seik Kim, . "Economic Assimilation of Foreign-Born Workers in the United States: An Overlapping Rotating Panel Analysis," Working Papers UWEC-2008-19, University of Washington, Department of Economics.
  17. Scotton, Carol R. & Taylor, Laura O., 2011. "Valuing risk reductions: Incorporating risk heterogeneity into a revealed preference framework," Resource and Energy Economics, Elsevier, vol. 33(2), pages 381-397, May.

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