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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. 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 for the Study of Labor (IZA).
    2. 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.
    3. 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.
    4. 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.

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