Working Paper Series
Estimation of Wage Gains and Welfare Gains from Self-Selection Models
Abstract: In this paper we consider the basic self-selection model
for the effects of education, training, unions, and other activities on
wages. We show that past models have ignored "heterogeneity of rewards" to
the activity--i.e., differences across individuals in the rate of return to
the activity--as a source of selection bias. We model such heterogeneity,
show how its presence can be tested, and draw out its implications for the
wage and welfare gains to the activity. An empirical application provides
strong support for such heterogeneity.
Keywords: Education; Unions; Wage; (follow links to similar papers)
JEL-Codes: E24; I20; (follow links to similar papers)
27 pages, December 1983
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