Cappellari, Lorenzo (1999) Low-pay transitions and attrition bias in Italy: an analysis using simulation based estimation. Working Paper. University of Warwick, Department of Economics, Coventry.

Preview

PDF WRAP_Cappellari_twerp532.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (73Kb)

Abstract

This paper analyses the extent to which existing econometric models of low-pay transition probabilities in Italy are biased by the presence of endogenous panel attrition. Non-random exits from the sample of wage earners may result from both demand and supply side factors and this could lead to under- or overestimation (respectively) of the extent of low-wage persistence. The analysis is carried out by extending the bivariate probit model used in Cappellari [1999] (where starting state and transition probabilities are jointly modelled thus tackling the endogeneity of the conditioning starting wage state) with a third equation which controls for the non-randomness of panel attrition. The resulting trivariate probit model with endogenous switching, whose evaluation is not feasible within the routines customarily available in microeconometric packages, is implemented by applying simulation estimation techniques. Results show the ignorability of attrition in SHIW data, thus pointing towards the robustness of the results previously obtained without controlling for attrition.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	D History General and Old World > DG Italy H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Wages -- Italy, Poor -- Italy, Ranking and selection (Statistics), Estimation theory, Simulation games, Italy -- Economic conditions
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	October 1999
Number:	No.532
Number of Pages:	30
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC), Università cattolica del Sacro Cuore (UCSC)
Grant number:	R00429724408 (ESRC)
References:	Bingley, P. - Bjørn, J. - Westergård Nielsen, N. [1995]: “Determinants of Wage Mobility in Denmark 1980-1990”, University of Aarhus, CLS working paper 10-95. Börsch Supan, A. - Hajivassiliou, V. - Kotlikoff, L. - Morris, J. [1992]: “Health, Children and Elderly Living Arrangements. A Multiperiod - Multinomial Probit Model with Unobserved Heterogeneity and Autocorrelated Errors”, in Topics in the Economics of Ageing, D. Wise (ed.), The University of Chicago Press, pp. 79-104. Börsch Supan, A. - Hajivassiliou, V. [1993]: “Smooth Unbiased Multivariate Probability Simulators for Maximum Likelihood Estimation of Limited Dependent Variable Models”, Journal of Econometrics, 58 (3), pp.347-368. Cappellari, L. [1999]: “Low-Wage Mobility in the Italian Labour Market”, Warwick Economics Research Paper, no. 531. Gourieroux, C. - Monfort, A [1996]: “Simulation-Based Econometric Methods”, CORE Lectures, Oxford University Press. Hajivassiliou, V. - Ruud, P. [1994]: “Classical Estimation Methods for LDV Models Using Simulation”, in Handbook of Econometrics, vol. IV, Engle and McFadden (eds.), pp. 2383-2441. Hajivassiliou, V. [1997]: “Some Practical Issue in Maximum Simulated Likelihood”, STICERD discussion paper no. EM/97/340. Hausman, J. - Wise, D. [1979]: “Attrition Bias in Experimental Panel Data: The Gary Income Maintenance Experiment”, Econometrica, 47, pp.. 455-473. Heckman, J.J. [1981a]: “The Incidental Parameters Problem and the Problem of Initial Conditions in Estimating a Discrete Time - Discrete Data Stochastic Process”, in Structural Analysis of Discrete Data with Economic Applications, Manski C.F. and McFadden D. (eds.), Mit Press. Keane, M - Moffit, R. - Runkle, D. [1988]: “Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro-Data”, Journal of political Economy, 96, pp.1232-1266. Stern, S. [1997]: “Simulation-Based Estimation”, Journal of Economic Literature, vol XXXV, pp 2006-2039. Stewart, M.B. - Swaffield, J.K. [1999]: "Low Pay Dynamics and Transition Probabilities", Economica, 66, pp. 23-42. Verbeek, M. - Nijman, T. [1992]: “Incomplete Panels and Selection Bias”, in The Econometrics of Panel Data, Mátyás and Sevestre (eds.), Kluwer Academic Publishers, pp. 262-302.
URI:	http://wrap.warwick.ac.uk/id/eprint/1647

Request changes to a record

Actions (login required)

View Item