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An estimation of worker and firm effects with censored data

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  • González de San Román, Ainara
  • Rebollo-Sanz, Yolanda F.

Abstract

In this paper, the authors develop a new estimation method that is suitable for censored models with two high-dimensional fixed effects and that is based on a sequence of least squares regressions, yielding significant savings in computing time and hence making it applicable to frameworks in which standard estimation techniques become unfeasible. The authors analyze its theoretical properties and evaluate its practical performance in small samples through a detailed Monte Carlo study. Finally, using a longitudinal match employer-employee dataset from Spain, they show that the biases encountered when ignoring censored issues can be significant to the role of firms in terms of wage dispersion: individual heterogeneity explains more than 60% of wage dispersion.

Suggested Citation

  • González de San Román, Ainara & Rebollo-Sanz, Yolanda F., 2014. "An estimation of worker and firm effects with censored data," Economics Discussion Papers 2014-28, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201428
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    Cited by:

    1. Anna Zaharieva, 2014. "On-the-Job Search and Optimal Schooling under Uncertainty and Irreversibility," Politica economica, Società editrice il Mulino, issue 2-3, pages 299-339.
    2. Yolanda F. Rebollo-Sanz, 2017. "Decomposing the structure of wages into firm and worker effects: some insights from a high unemployment economy," Working Papers 17.10, Universidad Pablo de Olavide, Department of Economics.

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    More about this item

    Keywords

    fixed effects; algorithm; wage decomposition; censoring; simulation; assortative matching;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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