Inter-Industry and Inter-Region Differentials: Mechanics and Interpretation
In their seminal study on inter-industry wage differentials, Krueger and Summers (1988) expressed estimated industry differences as deviations from a hypothetical employment-share weighted mean. Virtually the whole labor literature has followed their approach, yet most studies avoid calculating the exact standard errors of these differences. This note relates this problem to the general literature on dummy variables and their interpretation. It is demonstrated that the implementation of exact estimates only involves simple matrix operations making any approximative procedure difficult to justify. Disregarding this conclusion will in practice, even with large samples, lead to substantially overstated standard errors of the estimated differentials and to the understatement of their overall variability.
|Date of creation:|
|Date of revision:|
|Publication status:||forthcoming The Review of Economics and Statistics|
|Contact details of provider:|| Postal: Ludwigstrasse 28 RG, 80539 Muenchen|
Phone: +49 / 89 / 2180-2126
Fax: +49 / 89 / 33 63 92
Web page: http://www.selapo.vwl.uni-muenchen.de/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:wop:selapo:9504. 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: (Thomas Krichel)
If references are entirely missing, you can add them using this form.