Why Do Fixed-Effects Models Perform So Poorly? The Case of Academic Salaries
A large and growing line of research has used longitudinal data to eliminate unobservable individual effects that may bias cross-section parameter estimates. The resulting estimates, though unbiased, are generally quite imprecise. This study shows that the imprecision can arise from the measurement error that commonly exists in the data used to represent the dependent variable in these studies. The example of economists' salaries, which are administrative data free of measurement error, demonstrates that estimates based on changes in longitudinal data can be precise. The results indicate the importance of improving the measurement of the variables to which the increasingly high-powered techniques designed to analyze panel data are applied. The estimates also indicate that the payoff to citations to scholarly work is not an artifact of unmeasured individual effects that could be biasing previous estimates of the determinants of academic salaries.
|Date of creation:||Jan 1987|
|Publication status:||published as Southern Economic Journal, Vol.56, No. 1, pp. 39-45, (July 1989).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- T. S. Breusch & A. R. Pagan, 1980.
"The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics,"
Review of Economic Studies,
Oxford University Press, vol. 47(1), pages 239-253.
- Breusch, T.S. & Pagan, A.R., "undated". "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP 412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Douglas Holtz-Eakin & Whitney K. Newey & Harvey S. Rosen, 1989. "Implementing Causality Tests with Panel Data, with an Example from LocalPublic Finance," NBER Technical Working Papers 0048, National Bureau of Economic Research, Inc.
- Richard B. Freeman, 1983.
"Longitudinal Analyses of the Effects of Trade Unions,"
NBER Working Papers
1207, National Bureau of Economic Research, Inc.
- Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
- Freeman, Richard Barry, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Scholarly Articles 4631951, Harvard University Department of Economics.
- Griliches, Zvi & Hausman, Jerry A., 1986.
"Errors in variables in panel data,"
Journal of Econometrics,
Elsevier, vol. 31(1), pages 93-118, February.
- Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
- Lazear, Edward P, 1976.
"Age, Experience, and Wage Growth,"
American Economic Review,
American Economic Association, vol. 66(4), pages 548-558, September.
- Gary Solon, 1986. "Bias in Longitudinal Estimation of Wage Gaps," NBER Technical Working Papers 0058, National Bureau of Economic Research, Inc.
- Chowdhury, Gopa & Nickell, Stephen, 1985. "Hourly Earnings in the United States: Another Look at Unionization, Schooling, Sickness, and Unemployment Using PSID Data," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 38-69, January.
- Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-532, October.
- Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-371, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2135. 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: ()
If references are entirely missing, you can add them using this form.