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Evidence on the Validity of Cross-Sectional and Longitudinal Labor Market Data

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  • Bound, John
  • Brown, Charles
  • Duncan, Greg J
  • Rodgers, Willard L

Abstract

This article investigates error properties of survey reports of labor market variables. We use the Panel Study of Income Dynamics (PSID) Validation Study, a two-wave panel survey of workers employed by a large firm that shared its detailed payroll records. Individuals' reports of annual earnings are fairly accurate. Errors are negatively related to true earnings, reducing bias due to measurement error when earnings are used as an Independent variable. Biases are moderately larger for changes in earnings. Earnings per hour are less reliably reported than annual earnings. Biases in estimating earnings functions are relatively small, but those in labor supply functions may be important. Copyright 1994 by University of Chicago Press.

Suggested Citation

  • Bound, John & Brown, Charles & Duncan, Greg J & Rodgers, Willard L, 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 345-368, July.
  • Handle: RePEc:ucp:jlabec:v:12:y:1994:i:3:p:345-68
    DOI: 10.1086/298348
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    References listed on IDEAS

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    1. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
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