Work Experience as a Source of Specification Error in Earnings Models: Implications for Gender Wage Decompositions
AbstractWe address the bias from using potential vs. actual experience in earnings models. Statistical tests reject the classical errors-in-variable framework. The nature of the measurement error is best viewed as a model misspecification problem. We correct for this by modeling actual experience as a stochastic regressor and predicting experience using the NLSY79 and the PSID. Predicted experience measures are applied to the IPUMS. Our results suggest that potential experience biases the effects of schooling and the rates of return to labor market experience. Using such a measure in earnings models underestimates the explained portion of the male-female wage gap.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1920.
Length: 43 pages
Date of creation: Jan 2006
Date of revision:
Publication status: published in: Journal of Population Economics, 2009, 22 (2), 463 - 499
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Other versions of this item:
- Tracy Regan & Ronald Oaxaca, 2009. "Work experience as a source of specification error in earnings models: implications for gender wage decompositions," Journal of Population Economics, Springer, vol. 22(2), pages 463-499, April.
- Tracy L. Regan & Ronald L. Oaxaca, 2007. "Work experience as a source of specification errorin earnings models: implications for genderwage decompositions," Working Papers 2010-6, University of Miami, Department of Economics.
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-BEC-2006-01-24 (Business Economics)
- NEP-LAB-2006-01-24 (Labour Economics)
- NEP-LAM-2006-01-24 (Central & South America)
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