Estimation of Earnings- and Schooling Choice Relations: A Likelihood Approach
AbstractIn this paper we develop a full information maximum likelihood method for the estimation of a joint model for the choice of length of schooling and the corresponding earnings equation. The model for schooling is assumed to be an ordered probit model, whereas the earnings equation is allowed to be very general with explanatory variables that are flexible transformations of schooling and experience. The coefficients associated with length of schooling and experience are allowed to be random and all the random terms of the model may be correlated. Under normality assumptions, we show that the joint probability distribution for schooling and earnings can be expressed on a closed form that is tractable for empirical analysis.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 486.
Date of creation: Nov 2006
Date of revision:
Schooling choice; earnings equation; treatment effects; self-selection; ordered probit; random coefficients; full information maximum likelihood;
Find related papers by JEL classification:
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- I20 - Health, Education, and Welfare - - Education - - - General
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-DCM-2007-01-13 (Discrete Choice Models)
- NEP-ECM-2007-01-13 (Econometrics)
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