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The Estimation of Wage Gains and Welfare Gains in Self-selection

Anders Bjorklund (anders.bjorklund@sofi.su.se) and Robert Moffitt

The Review of Economics and Statistics, 1987, vol. 69, issue 1, 42-49

Abstract: The authors modify the basic self-sele ction model for the effects ofeducation, training, unions, and other activities on wages, by including "heterogeneity of rewards" to the activity-i.e., diffe rences across individuals in the rate of return to the activity. The authors sho w that such heterogeneity creates a new form of selectionbias. They provide tes ts for its presence and draw out its implications for the wage and welfare gains to the activity. An empirical application provides strong support for such hete rogeneityin one particular training program. Copyright 1987 by MIT Press.

Date: 1987
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