Employer Changes and Wage Changes: Estimation with Measurement Error in a Binary Variable

Adele Bergin

LABOUR, 2015, vol. 29, issue 2, 194-223

Abstract: 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 Hausman et al. is applied to a job change model for Ireland, 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.

Date: 2015
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