IDEAS home Printed from https://ideas.repec.org/a/jns/jbstat/v221y2001i4p418-431.html
   My bibliography  Save this article

Zur korrekten Interpretation der Ergebnisse einer log-linearen Regression bei Heteroskedastie. Eine methodische Untersuchung mit einer Anwendung auf die relativen Löhne von Ausländern / Correctly Interpreting the Results from a Log-linear Regression under Heteroskedasticity. Methods and an Application to the Relative Wages of Immigrants

Author

Listed:
  • Winkelmann Rainer

    () (IZA Bonn, Postfach 7240, D-53072 Bonn)

Abstract

The common estimator for relative adjusted wage differentials based on dummy variables in loglinear regressions is inconsistent in the presence of group-specific heteroskedasticity. The direction and magnitude of the bias are derived. At the same time, a heteroskedasticity-consistent estimator is proposed. The formulas are exact for normally distributed errors and approximations otherwise. An example on the wage determination in the German labor market shows that ignoring the problem of heteroskedasticity will lead to an underestimation of the relative wage gap between Germans and Immigrants, since the wages of immigrants are relatively less dispersed. Evidence from the literature as well as an independent analysis using data from the German Socio-Economic Panel for 1996 yield a downward bias of up to 25 percent. The importance of these results extend beyond the case of dummy variables to the general problem of Computing expectations of retransformed variables.

Suggested Citation

  • Winkelmann Rainer, 2001. "Zur korrekten Interpretation der Ergebnisse einer log-linearen Regression bei Heteroskedastie. Eine methodische Untersuchung mit einer Anwendung auf die relativen Löhne von Ausländern / Correctly Inte," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(4), pages 418-431, August.
    • Handle: RePEc:jns:jbstat:v:221:y:2001:i:4:p:418-431
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/jbnst.2001.221.issue-4/jbnst-2001-0406/jbnst-2001-0406.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
    2. Schmidt, Christoph M., 1997. "Immigrant performance in Germany: Labor earnings of ethnic German migrants and foreign guest-workers," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(Supplemen), pages 379-397.
    3. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
    4. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    5. Dustmann, C, 1993. "Earnings Adjustment of Temporary Migrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(2), pages 153-168, May.
    6. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    8. Giles, David E. A., 1982. "The interpretation of dummy variables in semilogarithmic equations : Unbiased estimation," Economics Letters, Elsevier, vol. 10(1-2), pages 77-79.
    9. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    10. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:221:y:2001:i:4:p:418-431. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.