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The Accuracy of Predicted Wages of the Non‐Employed and Implications for Policy Simulations from Structural Labour Supply Models

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  • ROBERT BREUNIG
  • JOSEPH MERCANTE

Abstract

We examine the accuracy of predicted wages for the non‐employed. We argue that unemployment, marginal attachment, and not in the labour force are three distinct states. Using panel data from Australia, we test the accuracy of predicted wages for these three groups of non‐employed using sample selection models. Focusing on those individuals who subsequently enter employment, we find that predictions which incorporate the estimated sample selection correction perform poorly, particularly for the marginally attached and the not in the labour force. These results have important implications for policy simulations from structural labour supply models.

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  • Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non‐Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, March.
    • Handle: RePEc:bla:ecorec:v:86:y:2010:i:272:p:49-70
    DOI: 10.1111/j.1475-4932.2009.00619.x
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    Cited by:

    1. Zuzana Siebertova & Matus Senaj & Norbert Svarda & Jana Valachyova, 2013. "To Work or Not to Work? Estimates of Labour Supply Elasticities," Working and Discussion Papers WP 5/2013, Research Department, National Bank of Slovakia.
    2. Martina Lubyová & Miroslav Štefánik & Pavol Baboš & Daniel Gerbery & Veronika Hvozdíková & Katarína Karasová & Ivan Lichner & Tomáš Miklošovic & Marek Radvanský & Eva Rublíková & Ivana Studená, . "Labour Market in Slovakia 2017+," Books, Institute of Economic Research, Slovak Academy of Sciences, edition 1, number 003.
    3. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2016. "Labour Force Participation Elasticities: the Case of Slovakia," Working Papers Working Paper No. 1/2016, Council for Budget Responsibility.
    4. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2016. "Labour force participation elasticities and the move away from a flat tax: the case of Slovakia," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-26, December.
    5. Robert Breunig & Xiaodong Gong & Anthony King, 2012. "Partnered Women's Labour Supply and Child‐Care Costs in Australia: Measurement Error and the Child‐Care Price," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 51-69, June.
    6. Norbert Švarda & Jana Valachyová & Matúš Senaj & Zuzana Siebertová, 2015. "To Work or Not to Work? Updated Estimates of Labour Supply Elasticities," Discussion Papers 32, Central European Labour Studies Institute (CELSI).
    7. Li Tan & Cory Koedel, 2019. "The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 613-637, October.
    8. Alfred Michael Dockery & Rachel Ong & Gavin Wood, 2011. "Measuring Worker Disincentives: Taxes, Benefits and the Transition into Employment," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 14(3), pages 265-288.
    9. Boyd Hunter & Matthew Gray, 2012. "Indigenous Labour Supply following a Period of Strong Economic Growth," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 15(2), pages 141-159.
    10. Xiaodong Gong & Robert Breunig, 2010. "Child care availability, quality and affordability: are local problems related to maternal labour supply ?," Treasury Working Papers 2010-02, The Treasury, Australian Government, revised Apr 2010.
    11. Martin O’Brien, 2011. "Discouraged Older Male Workers and the Discouraged Worker Effect," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 14(3), pages 217-235.
    12. Rachel Ong & Gavin Wood & Melek Cigdem, 2013. "Work incentives and decisions to remain in paid work in Australia," Bankwest Curtin Economics Centre Working Paper series WP1312, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    13. Duo Qin & Sophie van Huellen & Raghda Elshafie & Yimeng Liu & Thanos Moraitis, 2019. "A Principled Approach to Assessing Missing-Wage Induced Selection Bias," Working Papers 216, Department of Economics, SOAS University of London, UK.
    14. Joseph Mercante & Penny Mok, 2014. "Estimation of wage equations for New Zealand," Treasury Working Paper Series 14/09, New Zealand Treasury.
    15. Christian Weistroffer & Steffen Sebastian, 2015. "The German Open-End Fund Crisis – A Valuation Problem?," The Journal of Real Estate Finance and Economics, Springer, vol. 50(4), pages 517-548, May.
    16. Rebecca Brown & Tue Gørgens, 2009. "Corporate governance and financial performance in an Australian context," Treasury Working Papers 2009-02, The Treasury, Australian Government, revised Mar 2009.
    17. Robert Breunig & Andrew Weiss & Chikako Yamauchi & Xiaodong Gong & Joseph Mercante, 2011. "Child Care Availability, Quality and Affordability: Are Local Problems Related to Labour Supply?," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 109-124, March.

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    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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