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Employer Changes and Wage Changes: Estimation with Measurement Error in a Binary Variable
Author(s) -
Bergin Adele
Publication year - 2015
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/labr.12051
Subject(s) - econometrics , covariate , estimator , wage , economics , estimation , observational error , variable (mathematics) , statistics , mathematics , labour economics , management , mathematical analysis
Self‐reported tenure is often used to determine job changes. We show there are substantial inconsistencies in these responses; consequently, we risk misclassifying job changes as stays and vice versa. An estimator from H ausman et al . is applied to a job change model for I reland, and we find that ignoring misclassification may substantially underestimate the true number of changes and lead to diminished covariate effects. The main contribution of the paper is to control for misclassification when estimating the wage effects of job mobility. A two‐step approach is adopted. We find ignoring misclassification leads to a significant downwards bias in the wage impact, and we provide an estimate that corrects for measurement error.