TY - JOUR
T1 - Measurement error in human capital and the black-white wage gap
AU - Bollinger, Christopher R.
N1 - Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2003/8
Y1 - 2003/8
N2 - Proxy variables are frequently used in economics to control for unavailable variables in a linear regression setting. For example, AFQT scores have been used to control for human capital accumulation in measuring black-white wage differentials. This practice may bias the coefficient estimates for the correctly measured variables as well. This paper models proxy variables as a measurement error process and derives bounds for the coefficients on the correctly measured variables under a variety of assumptions. The results show that the coefficient on race in a linear regression is an overstatement of the actual black-white wage gap. Sensitivity analysis suggests that if human capital could be correctly measured it would be unlikely that the coefficient on black would be negative.
AB - Proxy variables are frequently used in economics to control for unavailable variables in a linear regression setting. For example, AFQT scores have been used to control for human capital accumulation in measuring black-white wage differentials. This practice may bias the coefficient estimates for the correctly measured variables as well. This paper models proxy variables as a measurement error process and derives bounds for the coefficients on the correctly measured variables under a variety of assumptions. The results show that the coefficient on race in a linear regression is an overstatement of the actual black-white wage gap. Sensitivity analysis suggests that if human capital could be correctly measured it would be unlikely that the coefficient on black would be negative.
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U2 - 10.1162/003465303322369731
DO - 10.1162/003465303322369731
M3 - Article
AN - SCOPUS:0242474620
SN - 0034-6535
VL - 85
SP - 578
EP - 585
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 3
ER -