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Testing for the specification of the wage equation: double selection approach or single selection approach

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  • Madhu Mohanty

Abstract

The wage that a worker receives is observed only when he/she is employed. The employment of the worker, however, depends on two sequential decisions: the worker's decision to work and the employer's decision to hire. The wage sample, thus, is obtained through a double selection process. Estimation of the wage equation ignoring the roles of both selection decisions may result in omitted variable misspecification, leading to biased estimates. This study rejects the wage specification that allows only one selection decision, and shows that the wage equation with double selection specification cannot be rejected at any conventional level of significance.

Suggested Citation

  • Madhu Mohanty, 2001. "Testing for the specification of the wage equation: double selection approach or single selection approach," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 525-529.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:8:p:525-529
    DOI: 10.1080/135048500011957
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    Cited by:

    1. DI PIETRO Giorgio, 2020. "Evidence on study abroad programmes: Data and indicators," JRC Research Reports JRC119964, Joint Research Centre.
    2. Anastasios Panagiotelis & Michael S. Smith & Peter J. Danaher, 2014. "From Amazon to Apple: Modeling Online Retail Sales, Purchase Incidence, and Visit Behavior," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(1), pages 14-29, January.
    3. Giorgio Di Pietro, 2004. "The determinants of university dropout in Italy: a bivariate probability model with sample selection," Applied Economics Letters, Taylor & Francis Journals, vol. 11(3), pages 187-191.
    4. Giorgio Di Pietro & Andrea Cutillo, 2006. "Does Attending a Catholic School Make a Difference? Evidence From Italy," Bulletin of Economic Research, Wiley Blackwell, vol. 58(3), pages 193-234, July.
    5. Hübler, Dominik & Hübler, Olaf, 2006. "Is There a Trade-off Between Job Security and Wages in Germany and the UK?," IZA Discussion Papers 2241, Institute of Labor Economics (IZA).
    6. Rong Zhang & Brett A. Inder & Xibin Zhang, 2012. "Parameter estimation for a discrete-response model with double rules of sample selection: A Bayesian approach," Monash Econometrics and Business Statistics Working Papers 5/12, Monash University, Department of Econometrics and Business Statistics.
    7. Kwadwo Opoku & Emmanuel Adu Boahen, 2023. "Gender wage gaps in Ghana: a comparison across different selection models," SN Business & Economics, Springer, vol. 3(7), pages 1-33, July.
    8. Reichl Luthra, Renee, 2010. "Enduring inequality: labor market outcomes of the immigrant second generation in Germany," ISER Working Paper Series 2010-30, Institute for Social and Economic Research.
    9. Zhang, Rong & Inder, Brett A. & Zhang, Xibin, 2015. "Bayesian estimation of a discrete response model with double rules of sample selection," Computational Statistics & Data Analysis, Elsevier, vol. 86(C), pages 81-96.
    10. Lincove, Jane Arnold, 2009. "Determinants of schooling for boys and girls in Nigeria under a policy of free primary education," Economics of Education Review, Elsevier, vol. 28(4), pages 474-484, August.
    11. José de Hevia & María Arrazola, 2009. "Marginal effects in the double selection regression model: an illustration for the wages of women in Spain," Economics Bulletin, AccessEcon, vol. 29(2), pages 611-621.
    12. Rong Zhang & Brett A. Inder & Xibin Zhang, 2013. "Bayesian estimation of a discrete response model with double rules of sample selection," Monash Econometrics and Business Statistics Working Papers 24/13, Monash University, Department of Econometrics and Business Statistics.

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