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Inference on an extended Roy model, with an application to schooling decisions in France

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  • D’Haultfœuille, Xavier
  • Maurel, Arnaud

Abstract

This paper considers the identification and estimation of an extension of Roy’s model (1951) of sectoral choice, which includes a non-pecuniary component in the selection equation and allows for uncertainty on potential earnings. We focus on the identification of the non-pecuniary component, which is key to disentangling the relative importance of monetary incentives versus preferences in the context of sorting across sectors. By making the most of the structure of the selection equation, we show that this component is point identified from the knowledge of the covariate effects on earnings, as soon as one covariate is continuous. Notably, and in contrast to most results on the identification of Roy models, this implies that identification can be achieved without any exclusion restriction nor large support condition on the covariates. As a by-product, bounds are obtained on the distribution of the ex ante monetary returns. We propose a three-stage semiparametric estimation procedure for this model, which yields root-n consistent and asymptotically normal estimators. Finally, we apply our results to the educational context, by providing new evidence from French data that non-pecuniary factors are a key determinant of higher education attendance decisions.

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  • 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.
  • Handle: RePEc:eee:econom:v:174:y:2013:i:2:p:95-106
    DOI: 10.1016/j.jeconom.2013.01.005
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    Cited by:

    1. Ismael Mourifie & Marc Henry & Romuald Meango, 2017. "Sharp bounds for the Roy model," Papers 1709.09284, arXiv.org.
    2. Peter Arcidiacono & V. Joseph Hotz & Arnaud Maurel & Teresa Romano, 2014. "Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data," NBER Working Papers 20626, National Bureau of Economic Research, Inc.
    3. Johannes S. Kunz & Kevin E. Staub, 2016. "Subjective completion beliefs and the demand for post-secondary education," ECON - Working Papers 218, Department of Economics - University of Zurich.
    4. repec:eee:econom:v:203:y:2018:i:1:p:129-142 is not listed on IDEAS
    5. Clark, Brian & Joubert, Clement & Maurel, Arnaud, 2014. "The Career Prospects of Overeducated Americans," IZA Discussion Papers 8313, Institute for the Study of Labor (IZA).
    6. Delavande, Adeline & Zafar, Basit, 2014. "University choice: the role of expected earnings, non-pecuniary outcomes and financial constraints," ISER Working Paper Series 2014-38, Institute for Social and Economic Research.
    7. D’Haultfœuille, Xavier & Maurel, Arnaud & Zhang, Yichong, 2018. "Extremal quantile regressions for selection models and the black–white wage gap," Journal of Econometrics, Elsevier, vol. 203(1), pages 129-142.
    8. Marc Henry & Ismael Mourifié, 2012. "Sharp Bounds in the Binary Roy Model," CIRJE F-Series CIRJE-F-835, CIRJE, Faculty of Economics, University of Tokyo.
    9. Philipp Eisenhauer & James J. Heckman & Edward Vytlacil, 2015. "The Generalized Roy Model and the Cost-Benefit Analysis of Social Programs," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 413-443.
    10. Joseph G. Altonji & Peter Arcidiacono & Arnaud Maurel, 2015. "The Analysis of Field Choice in College and Graduate School: Determinants and Wage Effects," NBER Working Papers 21655, National Bureau of Economic Research, Inc.
    11. Brian Clark & Arnaud Maurel & Clement Joubert, 2014. "Career Prospects of Overeducated Americans," 2014 Meeting Papers 400, Society for Economic Dynamics.

    More about this item

    Keywords

    Roy model; Nonparametric identification; Schooling choices; ex ante returns to schooling;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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