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

TY - UNPB

T1 - Measurement error in income and schooling, and the bias for linear estimators

AU - Bingley, Paul

AU - Martinello, Alessandro

PY - 2014

Y1 - 2014

N2 - The characteristics of measurement error determine the bias of linear estimators. We propose a method for validating economic survey data allowing for measurement error in the validation source, and we apply this method by validating Survey of Health, Ageing and Retirement in Europe (SHARE) data with Danish administrative registers. We find that measurement error in surveys is classical for annual gross income but non-classical for years of schooling, causing a 21% amplification bias in IV estimators of returns to schooling. Using a 1958 Danish schooling reform, we contextualize our result with an estimate of the income returns to schooling.

AB - The characteristics of measurement error determine the bias of linear estimators. We propose a method for validating economic survey data allowing for measurement error in the validation source, and we apply this method by validating Survey of Health, Ageing and Retirement in Europe (SHARE) data with Danish administrative registers. We find that measurement error in surveys is classical for annual gross income but non-classical for years of schooling, causing a 21% amplification bias in IV estimators of returns to schooling. Using a 1958 Danish schooling reform, we contextualize our result with an estimate of the income returns to schooling.

M3 - Working paper

BT - Measurement error in income and schooling, and the bias for linear estimators

PB - SFI - Det nationale Forskningscenter for Velfærd

CY - Copenhagen

ER -