Munich Personal RePEc Archive

Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity

Woodcock, Simon (2006): Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity.

[img]
Preview
PDF
MPRA_paper_1341.pdf

Download (743kB) | Preview

Abstract

We consider the problem of estimating and decomposing wage differentials in the presence of unobserved worker, firm, and match heterogeneity. Controlling for these unobservables corrects omitted variable bias in previous studies. It also allows us to measure the contribution of unmeasured characteristics of workers, firms, and worker-firm matches to observed wage differentials. An application to linked employer-employee data shows that decompositions of inter-industry earnings differentials and the male-female differential are misleading when unobserved heterogeneity is ignored.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.