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DETERMINATION OF PARTICIPATION DECISION, HIRING DECISION, AND WAGES IN A DOUBLE SELECTION FRAMEWORK: MALE‐FEMALE WAGE DIFFERENTIALS IN THE U.S. LABOR MARKET REVISITED
Author(s) -
Mohanty MS
Publication year - 2001
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.2001.tb00061.x
Subject(s) - wage , compensating differential , economics , differential (mechanical device) , labour economics , sample (material) , selection (genetic algorithm) , efficiency wage , estimation , national longitudinal surveys , selection bias , wage share , statistics , mathematics , chemistry , management , chromatography , aerospace engineering , artificial intelligence , computer science , engineering
The magnitude of the male‐female wage differential is known to be highly sensitive to the specification of the wage equations used. An important source of misspecification is the failure to correct the sample selection bias that results from estimating the wage equation obtained through two sequential decisions: the worker's decision to participate in the labor market and the employer's decision to hire. Estimation of the wage equation ignoring this double selection process leads to biased estimates, and consequently the resulting male‐female wage differentials are likely to be misleading. Following a double selection approach and using a sample from the National Longitudinal Survey of Youth, this article examines the determinants of not only the wage equation but also the worker's participation and the employer's hiring decisions in both male and female samples. The study further demonstrates that the unexplained male‐female wage differential remains underestimated when the roles of both selection decisions are ignored in the estimation of wage equations.