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Identifying and Correcting Publication Selection Bias in the Efficiency-Wage Literature: Heckman Meta-Regression

Publication selection bias represents one of the most serious challenges to the integrity of empirical economics. We develop Heckman regression methods to solve this potentially persistent problem and apply these meta-regression methods to seventy five empirical estimates from the efficiency-wage literature. Although many researchers find mixed or ambiguous support for the efficiency wage hypothesis (EWH), our meta-analyses give unambiguous confirmation of the EWH. After correcting for publication selection bias, we estimate the wage elasticity of output to be 0.32, much smaller than what the neoclassical version of the efficiency wage hypothesis demands. This wage elasticity also depends significantly upon whether the researchers’ model accounts for the simultaneity of wages and productivity and whether their empirical model includes capital. In both cases, the ‘correct’ specification increases the magnitude of the wage elasticity of production, thereby further corroborating the EWH.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2007_11eco.pdf
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2007_11.

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Length: 32 pages
Date of creation: 21 Oct 2007
Date of revision:
Handle: RePEc:dkn:econwp:eco_2007_11
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Web page: http://www.deakin.edu.au/buslaw/aef/index.php

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  1. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, 07.
  2. Alan Krueger, 1999. "Measuring Labor's Share," NBER Working Papers 7006, National Bureau of Economic Research, Inc.
  3. T.D. Stanley, 2006. "Meta-Regression Methods for Detecting and Estimating Empirical Effects in the Presence of Publication Selection," Economics Series 2006_20, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  4. Paul Chen & Per-Anders Edin, 2002. "Efficiency Wages and Industry Wage Differentials: A Comparison Across Methods of Pay," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 617-631, November.
  5. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
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  7. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-48, October.
  8. T. D. Stanley, 2005. "Beyond Publication Bias," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 309-345, 07.
  9. T.D. Stanley & Stephen B. Jarrell, 1998. "Gender Wage Discrimination Bias? A Meta-Regression Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 947-973.
  10. Stanley, T D & Jarrell, Stephen B, 1989. " Meta-Regression Analysis: A Quantitative Method of Literature Survey s," Journal of Economic Surveys, Wiley Blackwell, vol. 3(2), pages 161-70.
  11. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  12. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  13. J. Bradford De Long & Kevin Lang, . "Are All Economic Hypotheses False?," J. Bradford De Long's Working Papers _117, University of California at Berkeley, Economics Department.
  14. Andrew Rose, 2004. "A Meta-Analysis of the Effect of Common Currencies on International Trade," NBER Working Papers 10373, National Bureau of Economic Research, Inc.
  15. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  16. Chris Doucouliagos & Patrice Laroche, 2007. "Unions and Profitability: A Meta-Analysis," Economics Series 2007_01, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  17. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
  18. Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
  19. Chris Doucouliagos, 2005. "Publication Bias in the Economic Freedom and Economic Growth Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 367-387, 07.
  20. Laroche, P., 2000. "What do Unions do to Productivity? A Meta-Analysis," Papers 2000-5, Groupe de recherche en économie financière et en gestion des entreprises, Universite Nancy 2.
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