Point identification in the presence of measurement error in discrete variables: application - wages and disability
AbstractThis paper addresses the problem of point identification in the presence of measurement error in discrete variables; in particular, it considers the case of having two "noisy" indicators of the same latent variable and without any prior information about the true value of the variable of interest. Based on the concept of the fourfold table and creating a nonlinear system of simultaneous equations from the observed proportions and predicted wages, we examine the need for different assumptions in order to obtain unique solutions for the system. We show that by imposing a simple restriction(s) for the joint misclassification probabilities, it is possible to measure the extent of the misclassification error in that specific variable. The proposed methodology is then used to identify whether people misreport their disability status using data from the British Household Panel Survey. Our results show that the probability of underreporting is greater than the probability of overreporting disability.
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Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 1214.
Date of creation: Nov 2012
Date of revision:
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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
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Other versions of this item:
- Saloniki, E-C.; & Gosling, A.;, 2013. "Point identification in the presence of measurement error in discrete variables: application - wages and disability," Health, Econometrics and Data Group (HEDG) Working Papers 13/16, HEDG, c/o Department of Economics, University of York.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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