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Title: Endogeneity of Union Status: An Empirical Demonstration
Resulting in 1 citation.
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Leigh, Duane E. Duncan, Gregory M. |
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Endogeneity of Union Status: An Empirical Demonstration Unpublished manuscript, Department of Economics, Washington State University, Pullman, 1983 Cohort(s): Older Men, Young Men Publisher: Department of Economics, Washington State University Keyword(s): Endogeneity; Unions; Variables, Instrumental; Wage Determination; Wage Effects; Wages An unsettled issue in the literature relating to the relative wage effect of unions is the appropriate treatment of union status in a wage determination model. In the context of a three-equation model determining union membership and union and nonunion sector wage rates, this paper presents an instrumental variables (IV) procedure for estimating the parameters of the wage equations and a test of the exogeneity of union status using the Hausman specification test. An advantage of our IV procedure in comparison to the widely used inverse Mill's ration procedure is that our procedure is a distribution-free estimator, whereas the inverse Mill's ration estimator hinges on the assumption that the joint probability distributions of the error terms are bivariate normal. Using data for a sample of middle-aged white workers, we estimate the parameters of the union and nonunion wage equations with both procedures. On the key question of the endogeneity of union status, the Hausman test decisively rejects the null hypothesis of exogeneity. The inverse Mill's ratio procedure, in contrast, provides coefficient estimates on the selectivity terms that fail to indicate evidence of sample selectivity in either sector. |
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Bibliography Citation
Leigh, Duane E. and Gregory M. Duncan. "Endogeneity of Union Status: An Empirical Demonstration." Unpublished manuscript, Department of Economics, Washington State University, Pullman, 1983. |