Correcting for Sample Selection From Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance

Laurent Lamy, Manasa Patnam and Michael Visser

No 11376, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper proposes a method to estimate the relationship between the price of a good sold at auction, and a post-auction outcome which is observed among auction winners. To account for both the endogeneity of the auction price and sample selection, we develop a control function approach based on the non-parametric identification of an auction model. In our application we estimate a performance equation using unique field data on wages earned by cricket players and their game-specific performances. Our empirical strategy benefits from the fact that wages are determined through randomly ordered sequential English auctions: the order in which players are sold acts as an exogenous shifter of wages. We find that the positive correlation between wages and performance comes (almost) exclusively from the selection and endogeneity effects.

Keywords: Sample selection; Structural econometrics of auctions; Wage-performance elasticity (search for similar items in EconPapers)
JEL-codes: C13 C57 D44 M52 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (6)

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Working Paper: Correcting for Sample Selection From Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance (2017)
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