 A New Test of Compensating Differences: Evidence on the Importance of Unobserved HeterogeneityMarios Michaelides
Journal of Sports Economics, 2010, vol. 11, issue 5, 475-495 Abstract: Previous evidence on the validity of the compensating differences theory has been ambiguous. This is mainly attributed to that, in most contexts, important components of worker skills are unobserved, leading to biased estimates of compensating differences. This article uses data on professional basketball players, which contain rich measures of worker ability, measures of employer nonpecuniary characteristics, and location amenities, to produce a new test of the theory. Empirical results strongly support the theory’s predictions in this context. Using this data, we also find that when important measures of player skills are omitted from the specification, there is only limited evidence in support of compensating differences. Our findings indicate that in the presence of unobserved heterogeneity, the quality of the empirical results is distorted and inference on the validity of the theory is misleading. Keywords: compensating differences; job characteristics; amenities; hedonic wages; sports economics; professional basketball (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:11:y:2010:i:5:p:475-495 Access Statistics for this article More articles in Journal of Sports Economics |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.