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Wage Comparisons -A Selectivity Bias

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  • Reuben Gronau

Abstract

The economics of information have been established by now as an integral part of economic analysis. However, surprisingly little has been written on the implications of search (and in particular, job search) for the estimation of the wage function and its ramifications in such cases as the estimation of the determinants of labor force participation, age-earning profiles, rates of return and rates of depreciation of human capital, degree of discrimination, etc. Given a wage offer distribution, the parameters of the observed wage distribution depend on the intensity of search. The lower a person’s wage demands the greater the chance of his finding an acceptable job, but the lower the wage he expects to receive and the wider the dispersion of acceptable wages around their mean. On the other hand, the job seeker may opt for a more ambitious search strategy, raising his minimum wage demand and consequently increasing the risk of remaining unemployed, but also increasing the expected wage and decreasing the dispersion of available offers. Models of wage offer distribution have traditionally been based on empirical observation of observed wage distribution. This approach may involve certain biases when applied to secondary labor groups â€" married women, teenagers and the aged. This paper attempts to point out some of these biases and suggests a method for their correction.

Suggested Citation

  • Reuben Gronau, 1973. "Wage Comparisons -A Selectivity Bias," NBER Working Papers 0013, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0013
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    References listed on IDEAS

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    1. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
    2. Ben-Porath, Yoram, 1973. "Labor-Force Participation Rates and the Supply of Labor," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 697-704, May-June.
    3. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    4. Rothschild, Michael, 1973. "Models of Market Organization with Imperfect Information: A Survey," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1283-1308, Nov.-Dec..
    5. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-862, December.
    6. Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, vol. 61(3), pages 290-301, June.
    7. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Cited by:

    1. Casey B. Mulligan & Yona Rubinstein, 2004. "The Closing of the Gender Gap as a Roy Model Illusion," NBER Working Papers 10892, National Bureau of Economic Research, Inc.
    2. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
    3. Tadashi Yamada & Tetsuji Yamada, 1985. "Part-Time Work vs. Full-Time Work of Married Women in Japan," NBER Working Papers 1608, National Bureau of Economic Research, Inc.
    4. Victor R. Fuchs, 1973. "Short-Run and Long-Run Prospects for Female Earnings," NBER Working Papers 0020, National Bureau of Economic Research, Inc.
    5. James J. Heckman & Thomas E. MaCurdy, 1982. "New Methods for Estimating Labor Supply Functions: A Survey," NBER Working Papers 0858, National Bureau of Economic Research, Inc.
    6. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    7. Casey B. Mulligan & Yona Rubinstein, 2005. "Selection, Investment, and Women's Relative Wages Since 1975," NBER Working Papers 11159, National Bureau of Economic Research, Inc.
    8. Juan Manuel del Pozo Segura, 2017. " Has the Gender Wage Gap been Reduced during the 'Peruvian Growth Miracle?' A Distributional Approach," Documentos de Trabajo / Working Papers 2017-442, Departamento de Economía - Pontificia Universidad Católica del Perú.
    9. Daniel S. Hamermesh & Stephen G. Donald, 2004. "The Effect of College Curriculum on Earnings: Accounting for Non-Ignorable Non-Response Bias," NBER Working Papers 10809, National Bureau of Economic Research, Inc.
    10. Daniel S. Hamermesh, 1999. "The Art of Labormetrics," NBER Working Papers 6927, National Bureau of Economic Research, Inc.
    11. Evgeniy M. Ozhegov, 2014. "The Underwriting, Choice And Performance Of Government-Insured Mortgages In Russia," HSE Working papers WP BRP 31/FE/2014, National Research University Higher School of Economics.

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