A Cautionary Note on Using Industry Affiliation to Predict Income
Many literatures investigate the causal impact of income on economic outcomes, for example in the context of intergenerational transmission or well-being and health. Some studies have proposed to use employer wage differentials and in particular industry affiliation as an instrument for income. We demonstrate that industry affiliation is correlated with fixed individual characteristics, specifically parents education and own height, conditional on the covariates typically controlled for in these studies. These results suggest that there is selection into industries based on unobservables. As a result the exclusion restriction in many IV studies of this type is likely violated.
|Date of creation:||Sep 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul J. Devereux & Daniel A. Ackerberg, 2008.
"Improved Jive estimators for overidentified linear models with and without heteroskedasticity,"
200817, School of Economics, University College Dublin.
- Daniel A. Ackerberg & Paul J. Devereux, 2009. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 351-362, May.
- Ackerberg, Daniel & Devereux, Paul J., 2008. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," CEPR Discussion Papers 6926, C.E.P.R. Discussion Papers.
- Jörn-Steffen Pischke, 2011.
"Money and Happiness: Evidence from the Industry Wage Structure,"
NBER Working Papers
17056, National Bureau of Economic Research, Inc.
- Pischke, Jörn-Steffen, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," IZA Discussion Papers 5705, Institute for the Study of Labor (IZA).
- Jörn-Steffen Pischke, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," CEP Discussion Papers dp1051, Centre for Economic Performance, LSE.
- Pischke, Jörn-Steffen, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," CEPR Discussion Papers 8409, C.E.P.R. Discussion Papers.
- Ritschl, Albrecht, 2012.
"The German Transfer Problem, 1920-1933: A Sovereign Debt Perspective,"
CEPR Discussion Papers
9062, C.E.P.R. Discussion Papers.
- Albrecht Ritschl, 2012. "The German Transfer Problem, 1920-1933: A Sovereign Debt Perspective," CEP Discussion Papers dp1155, Centre for Economic Performance, LSE.
- Carmit Segal, 2006. "Motivation, test scores and economic success," Economics Working Papers 1124, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2008.
- repec:oup:qjecon:v:107:y:1992:i:4:p:1421-36 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6840. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.