Work Experience as a Source of Specification Error in Earnings Models: Implications for Gender Wage Decompositions

Tracy Regan and Ronald Oaxaca

No 1920, IZA Discussion Papers from IZA Network @ LISER

Abstract: We address the bias from using potential vs. actual experience in earnings models. Statistical tests reject the classical errors-in-variable framework. The nature of the measurement error is best viewed as a model misspecification problem. We correct for this by modeling actual experience as a stochastic regressor and predicting experience using the NLSY79 and the PSID. Predicted experience measures are applied to the IPUMS. Our results suggest that potential experience biases the effects of schooling and the rates of return to labor market experience. Using such a measure in earnings models underestimates the explained portion of the male-female wage gap.

Keywords: decomposition; specification error; experience; gender (search for similar items in EconPapers)
JEL-codes: C81 J24 J31 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-01
New Economics Papers: this item is included in nep-bec, nep-lab and nep-lam
References: View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published - published in: Journal of Population Economics, 2009, 22 (2), 463 - 499

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Related works:
Journal Article: Work experience as a source of specification error in earnings models: implications for gender wage decompositions (2009)
Working Paper: Work experience as a source of specification errorin earnings models: implications for genderwage decompositions (2007)
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