Estimating the errors in hours of work and wage rates

Arleen Leibowitz

Expert InsightsPublished 1979

Labor supply equations are often estimated by regressing hours worked on a wage measure which is itself the quotient of income and hours, leading to downward biases. The author shows that where both income and hours of work are measured with error, the downward bias remains. Using data collected for the RAND Health Insurance Study, this paper presents evidence that hours data are inherently variable, even when reporting error is low. Using data on 350 individuals' wage information for the preceding week and for a "usual week" in the preceding four months, a considerable negative bias is seen in the wage elasticity of both annual and weekly hours with respect to hourly wage, when data are derived from report week as compared with the "usual" week measures.

Topics

Document Details

  • Copyright: RAND Corporation
  • Availability: Web Only
  • Year: 1979
  • Pages: 15
  • Document Number: P-6276

Citation

Chicago Manual of Style

Leibowitz, Arleen, Estimating the errors in hours of work and wage rates. Santa Monica, CA: RAND Corporation, 1979. https://www.rand.org/pubs/papers/P6276.html.
BibTeX RIS

This publication is part of the RAND paper series. The paper series was a product of RAND from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.