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Devereux, Paul J.
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Working Paper Series, UCD Centre for Economic Research 06/02
Grouping models are widely used in economics but are subject to nite sample bias. I show that the standard errors-in-variables estimator (EVE) is exactly equivalent to the Jackknife Instrumental Variables Estimator (JIVE), and use this relationship to develop an estimator which, unlike EVE, is unbiased in nite samples. The theoretical results are demonstrated using Monte Carlo experiments. Finally, I implement a model of intertemporal male labor supply using microdata from the United States Census. There are sizeable differences in the wage elasticity across estimators, showing the practical importance of the theoretical issues even when the sample size is quite large.
small sample bias
labor supply
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Working Paper

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