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Modeling Earnings Measurement Error: A Multiple Imputation Approach

  • Brownstone, David
  • Valletta, Robert G

Recent survey validation studies suggest that measurement error in earnings data is pervasive and violates classical measurement error assumptions and, therefore, may bias estimation of cross-section and longitudinal earnings models. The authors model the structure of earnings measurement error using data from the Panel Study of Income Dynamics Validation Study (PSIDVS). They then use Donald B. Rubin's (1987) multiple imputation techniques to estimate consistent earnings equations under nonclassical earnings measurement error in the PSID. The authors' technique is readily generalized and the empirical results demonstrate the potential importance of correcting for measurement error in earnings and related data, particularly during recessions. Copyright 1996 by MIT Press.

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Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 78 (1996)
Issue (Month): 4 (November)
Pages: 705-17

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Handle: RePEc:tpr:restat:v:78:y:1996:i:4:p:705-17
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  1. John Bound & Charles Brown & Greg J. Duncan & Willard L Rodgers, 1989. "Measurement Error In Cross-Sectional and Longitudinal Labor Market Surveys: Results From Two Validation Studies," NBER Working Papers 2884, National Bureau of Economic Research, Inc.
  2. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  3. Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 317-23, July.
  4. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
  5. Brownstone, David, 1991. "Multiple Imputations for LInear Regression Models," University of California Transportation Center, Working Papers qt6rv6n3sd, University of California Transportation Center.
  6. Jonathan S. Feinstein, 1991. "An Econometric Analysis of Income Tax Evasion and its Detection," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 14-35, Spring.
  7. Card, David & Lemieux, Thomas, 1994. "Changing Wage Structure and Black-White Wage Differentials," American Economic Review, American Economic Association, vol. 84(2), pages 29-33, May.
  8. Mathiowetz, Nancy A & Duncan, Greg J, 1988. "Out of Work, Out of Mind: Response Errors in Retrospective Reports of Unemployment," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(2), pages 221-29, April.
  9. Imbens, G.W. & Hellerstein, J.K., 1993. "Raking and Regression," Harvard Institute of Economic Research Working Papers 1657, Harvard - Institute of Economic Research.
  10. John Bound & Alan B. Krueger, 1989. "The Extent of Measurement Error In Longitudinal Earnings Data: Do Two Wrongs Make A Right?," NBER Working Papers 2885, National Bureau of Economic Research, Inc.
  11. George Jakubson, 1991. "Estimation and Testing of the Union Wage Effect Using Panel Data," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 971-991.
  12. Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-32, October.
  13. Bound, John, et al, 1994. "Evidence on the Validity of Cross-Sectional and Longitudinal Labor Market Data," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 345-68, July.
  14. Greenberg, David & Halsey, Harlan, 1983. "Systematic Misreporting and Effects of Income Maintenance Experiments on Work Effort: Evidence from the Seattle-Denver Experiment," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 380-407, October.
  15. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
  16. Pischke, Jorn-Steffen, 1995. "Measurement Error and Earnings Dynamics: Some Estimates from the PSID Validation Study," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 305-14, July.
  17. Greenberg, David & Moffitt, Robert & Friedmann, John, 1981. "Underreporting and Experimental Effects on Work Effort: Evidence from the Gary Income Maintenance Experiment," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 581-89, November.
  18. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
  19. George A. Akerlof & Janet L. Yellen, 1985. "Unemployment Through the Filter of Memory," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 747-773.
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