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Nonparametric Identification and Estimation in a Roy Model With Common Nonpecuniary Returns

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  • Bayer, Patrick
  • Khan, Shakeeb
  • Timmins, Christopher

Abstract

We consider identification and estimation of a Roy model that includes a common nonpecuniary utility component associated with each choice alternative. This augmented Roy model has broader applications to many polychotomous choice problems in addition to occupational sorting. We develop a pair of nonparametric estimators for this model, derive asymptotics, and illustrate small-sample properties with a series of Monte Carlo experiments. We apply one of these models to migration behavior and analyze the effect of Roy sorting on observed returns to college education. Correcting for Roy sorting bias, the returns to a college degree are cut in half. This article has supplementary material online.
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Suggested Citation

  • Bayer, Patrick & Khan, Shakeeb & Timmins, Christopher, 2011. "Nonparametric Identification and Estimation in a Roy Model With Common Nonpecuniary Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 201-215.
  • Handle: RePEc:bes:jnlbes:v:29:i:2:y:2011:p:201-215
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    Cited by:

    1. Marc Henry & Ismael Mourifié, 2012. "Sharp Bounds in the Binary Roy Model," CIRANO Working Papers 2012s-06, CIRANO.
    2. Ismael Mourifie & Marc Henry & Romuald Meango, 2017. "Sharp bounds for the Roy model," Papers 1709.09284, arXiv.org.
    3. D’Haultfœuille, Xavier & Maurel, Arnaud, 2013. "Inference on an extended Roy model, with an application to schooling decisions in France," Journal of Econometrics, Elsevier, vol. 174(2), pages 95-106.
    4. Hamilton, Timothy L. & Phaneuf, Daniel J., 2015. "An integrated model of regional and local residential sorting with application to air quality," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 71-93.
    5. Jacopo Mazza, 2012. "Does Risk Matter? A Semi-parametric Model for Educational Choices in the Presence of Uncertainty," The School of Economics Discussion Paper Series 1225, Economics, The University of Manchester.
    6. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.

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