Estimation of an Occupational Choice Model when Occupations are Misclassified

Sullivan, Paul (2006): Estimation of an Occupational Choice Model when Occupations are Misclassified.

Abstract

This paper examines occupational choices using a discrete choice model that accounts for the fact that self-reported occupation data is measured with error. Despite evidence from validation studies which suggests that there is a substantial amount of measurement error in self-reported occupations, existing research has not corrected for classification error when estimating models of occupational choice. This paper develops a panel data model of occupational choices that corrects for misclassification in occupational choices and measurement error in occupation-specific work experience variables. The model is used to estimate the extent of measurement error in self-reported occupation data and quantify the bias that results from ignoring measurement error in occupation codes when studying the determinants of occupational choices and estimating the effects of occupation-specific human capital on wages. The parameter estimates reveal that 9% of occupational choices in the 1979 cohort of the National Longitudinal Survey of Youth are misclassified. Ignoring misclassification biases the median parameter in the occupational choice model by 25%.

• Item Type: MPRA Paper
• Institution: Bureau of Labor Statistics
• Language: English
• Keywords: occupational choice; misclassification; simulation methods
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C25 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General

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