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Measurement error in income and schooling, and the bias of linear estimators

Bingley, Paul and Martinello, Alessandro LU (2017) In Journal Labor Economics p.1117-1148
Abstract
We propose a general framework for determining the extent of measurement error bias in OLS and IV estimators of linear models, while allowing for measurement error in the validation source. We apply this method by validating Survey of Health, Ageing and Retirement in Europe (SHARE) data with Danish administrative registers.
Contrary to most validation studies, we find measurement error in income is classical, once we account for imperfect validation data. We find non-classical measurement error in schooling, causing a 38 percent amplification bias in IV estimators of the returns, with important implications for the program evaluation literature.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Journal Labor Economics
pages
1117 - 1148
publisher
University of Chicago Press
external identifiers
  • scopus:85029767095
ISSN
0734-306X
DOI
10.1086/692539
language
English
LU publication?
yes
id
c0656edb-bfd7-48f6-bb9b-ad3150d18553
date added to LUP
2016-08-16 11:20:10
date last changed
2017-11-14 09:49:55
@article{c0656edb-bfd7-48f6-bb9b-ad3150d18553,
  abstract     = {We propose a general framework for determining the extent of measurement error bias in OLS and IV estimators of linear models, while allowing for measurement error in the validation source. We apply this method by validating Survey of Health, Ageing and Retirement in Europe (SHARE) data with Danish administrative registers.<br/>Contrary to most validation studies, we find measurement error in income is classical, once we account for imperfect validation data. We find non-classical measurement error in schooling, causing a 38 percent amplification bias in IV estimators of the returns, with important implications for the program evaluation literature.},
  author       = {Bingley, Paul and Martinello, Alessandro},
  issn         = {0734-306X},
  language     = {eng},
  pages        = {1117--1148},
  publisher    = {University of Chicago Press},
  series       = {Journal Labor Economics},
  title        = {Measurement error in income and schooling, and the bias of linear estimators},
  url          = {http://dx.doi.org/10.1086/692539},
  year         = {2017},
}