EconPapers    
Economics at your fingertips  
 

Persistence Bias and the Wage-Schooling Model

Corrado Andini ()

No 7186, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: This paper provides an expression for the bias of the OLS estimator of the schooling coefficient in a simple static wage-schooling model where earnings persistence is not accounted for. It is argued that the OLS estimator of the schooling coefficient is biased upward, and the bias is increasing with potential labor-market experience and the degree of earnings persistence. In addition, NLSY data are used to show that the magnitude of the persistence bias is non-negligible, and the bias cannot be cured by increasing the control set. Further, it is shown that disregarding earnings persistence is still problematic for the estimation of the schooling coefficient even if individual unobserved heterogeneity and endogeneity are taken into account. Overall, the findings support the dynamic approach to the estimation of wage-schooling models recently suggested by Andini (2012; 2013).

Keywords: schooling; wages; dynamic panel-data models (search for similar items in EconPapers)
JEL-codes: C23 I21 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-lab and nep-lma
Date: 2013-01
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://ftp.iza.org/dp7186.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp7186

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Series data maintained by Mark Fallak ().

 
Page updated 2017-10-09
Handle: RePEc:iza:izadps:dp7186