Consistent Estimation Using Data From More Than One Sample
This paper considers the estimation of linear models when group average data from more than one sample is used. Conditions under which OL8 coefficient estimates are consistent are identified. The standard OL8 covariance estimate is shown to be inconsistent and a consistent estimator is proposed. Finally, since the conditions under which OL8 is consistent are quite restrictive, several estimators which are consistent in many cases where OL8 is not are developed. The large sample distribution properties and an estimator for the asymptotic covariance matrix for the most general of these alternative estimators is also presented. One important application of these findings is to estimating compensating wage differences. Past authors, beginning with Thaler and Rosen (1976) have argued that finer classification schemes would reduce errors-in-variable bias. The analysis presented here suggests that the opposite is true if finer classification results in fewer observations per classification. This could explain why authors using the broader (industry) classification schemes have found larger compensating differences and suggests that these estimates may be closer to the true values.
|Date of creation:||Mar 1984|
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- Ann P. Bartel, 1982. "Wages, nonwage job characteristics, and labor mobility," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(4), pages 578-589, July.
- Richard Thaler & Sherwin Rosen, 1976. "The Value of Saving a Life: Evidence from the Labor Market," NBER Chapters, in: Household Production and Consumption, pages 265-302 National Bureau of Economic Research, Inc.
- Lucas, Robert E B, 1977. "Hedonic Wage Equations and Psychic Wages in the Returns to Schooling," American Economic Review, American Economic Association, vol. 67(4), pages 549-58, September.
- Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
- Craig A. Olson, 1981. "An Analysis of Wage Differentials Received by Workers on Dangerous Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 167-185.
- Robert S. Smith, 1979. "Compensating wage differentials and public policy: A review," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-362, April.
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