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Point identification in the presence of measurement error in discrete variables: application - wages and disability

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  • Eirini-Christina Saloniki

    ()

  • Amanda Gosling

    ()

Abstract

This 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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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1214.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 1214.

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Date of creation: Nov 2012
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Handle: RePEc:ukc:ukcedp:1214

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
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Keywords: measurement error; discrete; misclassification probabilities; identification; disability;

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  1. 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.
  2. John Pepper & Brent Kreider, 2001. "Inferring Disability Status from Corrupt Data," Virginia Economics Online Papers 354, University of Virginia, Department of Economics.
  3. Horowitz, Joel L & Manski, Charles F, 1995. "Identification and Robustness with Contaminated and Corrupted Data," Econometrica, Econometric Society, vol. 63(2), pages 281-302, March.
  4. Jones, Melanie K. & Sloane, Peter J., 2009. "Disability and Skill Mismatch," IZA Discussion Papers 4430, Institute for the Study of Labor (IZA).
  5. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  6. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  7. Kreider, Brent, 2006. "Partially Identifying the Prevalence of Health Insurance Given Contaminated Sampling Response Error," Staff General Research Papers 12588, Iowa State University, Department of Economics.
  8. Melanie K. Jones, 2009. "The Employment Effect of the Disability Discrimination Act: Evidence from the Health Survey for England," LABOUR, CEIS, vol. 23(2), pages 349-369, 06.
  9. Madden, D., 1999. "Labour Market Discrimination on the Basis of Health: an Application to UK Data," Papers 99/13, College Dublin, Department of Political Economy-.
  10. Marjorie Baldwin & Edward J. Schumacher, 1999. "Job Mobility among Workers with Disabilities," Working Papers 9911, East Carolina University, Department of Economics.
  11. Christopher R. Bollinger, 2003. "Measurement Error in Human Capital and the Black-White Wage Gap," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 578-585, August.
  12. Kreider, Brent & Pepper, John V., 2003. "Disability and Employment: Reevaluating the Evidence in Light of Reporting Errors," Staff General Research Papers 10229, Iowa State University, Department of Economics.
  13. Melanie K. Jones & Paul L. Latreille & Peter J. Sloane, 2006. "Disability, gender, and the British labour market," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 407-449, July.
  14. Jones, Melanie K. & Latreille, Paul L. & Sloane, Peter J., 2007. "Disability and Work: A Review of the British Evidence," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 25, pages 473-498, Abril.
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