Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity

Simon D. Woodcock ()

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: We consider the problem of estimating and decomposing wage differentials in the presence of unobserved worker, firm, and match heterogeneity. Controlling for these unobservables corrects omitted variable bias in previous studies. It also allows us to measure the contribution of unmeasured characteristics of workers, firms, and worker-firm matches to observed wage differentials. An application to linked employer-employee data shows that decompositions of inter-industry earnings differentials and the male-female differential are misleading when unobserved heterogeneity is ignored.

Keywords: wage differentials; unobserved heterogeneity; employer-employee data (search for similar items in EconPapers)
JEL-codes: J31 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-lab
Date: 2007-05
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Related works:
Journal Article: Wage differentials in the presence of unobserved worker, firm, and match heterogeneity (2008)
Working Paper: Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity (2006)
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