Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69493
Authors: 
Andini, Corrado
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7186
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).
Subjects: 
schooling
wages
dynamic panel-data models
JEL: 
C23
I21
J31
Document Type: 
Working Paper

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