Estimation and Testing of Fixed Effect Models: Estimating the Union Wage Effect Using Panel Data

George Jakubson
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George Jakubson: Cornell University

No 588, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper presents estimates of the union wage effect while controlling for person specific unmeasured variables which do not change over time ('fixed effects') as well as specification tests for the person effect models commonly in use. a sample of men from the PSID, we find that controlling for a person effect POSUH in estimates of the union wage effect on the order of 5-81, as opposed to 201 in the cross section. An omnibus test based on an unrestricted reduced form and an instrumental variables test based on a differencing idea provide no evidence against the conventional model. A third test, based on a comparison of those who enter and leave union coverage, does provide evidence against the usual model.

Keywords: union wage effect; panel data models; fixed effects; random effects (search for similar items in EconPapers)
JEL-codes: D39 D4 (search for similar items in EconPapers)
Date: 1986-08
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Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:208

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