Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/51646 
Year of Publication: 
2011
Series/Report no.: 
IZA Discussion Papers No. 5847
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
A model for matched data with two types of unobserved heterogeneity is considered - one related to the observation unit, the other to units to which the observation units are matched. One or both of the unobserved components are assumed to be random. This mixed model allows identification of the effect of time-invariant variables on the observation units. Applying the Helmert transformation to reduce dimensionality simplifies the computational problem substantially. The framework has many potential applications; we apply it to wage modeling. Using Norwegian manufacturing data shows that the assumption with respect to the two types of heterogeneity affects the estimate of the return to education considerably.
Subjects: 
high-dimensional two-way unobserved components
matched employer-employee data
ECM-algorithm
JEL: 
C23
C81
J31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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