Estimating Compensating Wage Differentials with Endogenous Job Mobility
Lavetti, Kurt; Schmutte, Ian M.
We demonstrate a strategy for using matched employer-employee data to correct endogenous job mobility bias when estimating compensating wage differentials. Applied to fatality rates in the census of formal-sector jobs in Brazil between 2003-2010, we show why common approaches to eliminating ability bias can greatly amplify endogenous job mobility bias. By extending the search-theoretic hedonic wage framework, we establish conditions necessary to interpret our estimates as preferences. We present empirical analyses supporting the predictions of the model and identifying conditions, demonstrating that the standard models are misspecified, and that our proposed model eliminates latent ability and endogenous mobility biases
labor market; wage differentials; job mobility; Brazil
A more recent version of this paper can be found here: https://hdl.handle.net/1813/89102.