[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/9131.html
   My bibliography  Save this paper

A Cautionary Note on Using Industry Affiliation to Predict Income

Author

Listed:
  • Pischke, Jorn-Steffen
  • Schwandt, Hannes
Abstract
Many literatures investigate the causal impact of income on economic outcomes, for example in the context of intergenerational transmission or well-being and health. Some studies have proposed to use employer wage differentials and in particular industry affiliation as an instrument for income. We demonstrate that industry affiliation is correlated with fixed individual characteristics, specifically parents' education and own height, conditional on the covariates typically controlled for in these studies. These results suggest that there is selection into industries based on unobservables. As a result the exclusion restriction in many IV studies of this type is likely violated.

Suggested Citation

  • Pischke, Jorn-Steffen & Schwandt, Hannes, 2012. "A Cautionary Note on Using Industry Affiliation to Predict Income," CEPR Discussion Papers 9131, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9131
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP9131
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    2. McKinley Blackburn & David Neumark, 1992. "Unobserved Ability, Efficiency Wages, and Interindustry Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1421-1436.
    3. Daniel A. Ackerberg & Paul J. Devereux, 2009. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 351-362, May.
    4. Ritschl, Albrecht, 2012. "The German Transfer Problem, 1920-1933: A Sovereign Debt Perspective," CEPR Discussion Papers 9062, C.E.P.R. Discussion Papers.
    5. Pischke, Jorn-Steffen, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," CEPR Discussion Papers 8409, C.E.P.R. Discussion Papers.
    6. Carmit Segal, 2006. "Motivation, test scores and economic success," Economics Working Papers 1124, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2008.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Levinson, Arik, 2012. "Valuing public goods using happiness data: The case of air quality," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 869-880.
    2. Sebastian Himmler & Jannis Stöckel & Job van Exel & Werner B. F. Brouwer, 2021. "The value of health—Empirical issues when estimating the monetary value of a quality‐adjusted life year based on well‐being data," Health Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 1849-1870, August.
    3. Kaiser, Caspar, 2018. "People do not adapt to income changes: A re-evaluation of the dynamic effects of (reference) income on life satisfaction with GSOEP and UKHLS data," MPRA Paper 89867, University Library of Munich, Germany.
    4. Eleftherios Giovanis, 2019. "Worthy to lose some money for better air quality: applications of Bayesian networks on the causal effect of income and air pollution on life satisfaction in Switzerland," Empirical Economics, Springer, vol. 57(5), pages 1579-1611, November.
    5. Kaiser, Caspar, 2020. "People do not adapt. New analyses of the dynamic effects of own and reference income on life satisfaction," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 494-513.
    6. Hannes Schwandt, 2018. "Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 349-377, October.
    7. repec:cep:sticar:case/96 is not listed on IDEAS
    8. NI Bin & KATO Hayato & LIU Yang, 2020. "Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction," Discussion papers 20008, Research Institute of Economy, Trade and Industry (RIETI).
    9. Clingingsmith, David, 2017. "Negative Emotions, Income, and Welfare: Causal Estimates from the PSID," SocArXiv q2mxt, Center for Open Science.
    10. Powdthavee, Nattavudh & Lekfuangfu, Warn N. & Wooden, Mark, 2013. "The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia," IZA Discussion Papers 7365, Institute of Labor Economics (IZA).
    11. Abel Brodeur & Sarah Flèche, 2019. "Neighbors' Income, Public Goods, and Well‐Being," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(2), pages 217-238, June.
    12. Ambrey, Christopher L. & Fleming, Christopher M., 2014. "The causal effect of income on life satisfaction and the implications for valuing non-market goods," Economics Letters, Elsevier, vol. 123(2), pages 131-134.
    13. Eleftherios Giovanis & Oznur Ozdamar & Sahizer Samuk, 2021. "Health status and willingness-to-pay estimates for the benefits of improved recycling rates: evidence from Great Britain," SN Business & Economics, Springer, vol. 1(1), pages 1-28, January.
    14. Sebastian Himmler & Jannis Stöckel & Job van Exel & Werner Brouwer, 2020. "The Value of Health - Empirical Issues when Estimating the Monetary Value of a QALY Based on Well-Being," SOEPpapers on Multidisciplinary Panel Data Research 1101, DIW Berlin, The German Socio-Economic Panel (SOEP).
    15. Clingingsmith, David, 2016. "Negative Emotions, Income, and Welfare: Casual Estimates from the PSID," SocArXiv fae4x, Center for Open Science.
    16. Ambrey, Christopher L. & Fleming, Christopher M. & Chan, Andrew Yiu-Chung, 2014. "Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach," Ecological Economics, Elsevier, vol. 97(C), pages 172-181.
    17. Clingingsmith, David, 2016. "Negative emotions, income, and welfare: Causal estimates from the PSID," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 1-19.
    18. Ambrey, Christopher L. & Chan, Andrew Yiu-Chung & Fleming, Christopher M., 2013. "Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152133, Australian Agricultural and Resource Economics Society.
    19. Vendrik, Maarten C.M., 2013. "Adaptation, anticipation and social interaction in happiness: An integrated error-correction approach," Journal of Public Economics, Elsevier, vol. 105(C), pages 131-149.
    20. Matthew Manning & Christopher M. Fleming & Christopher L. Ambrey, 2016. "Life Satisfaction and Individual Willingness to Pay for Crime Reduction," Regional Studies, Taylor & Francis Journals, vol. 50(12), pages 2024-2039, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ambrey, Christopher L. & Fleming, Christopher M., 2011. "Valuing scenic amenity using life satisfaction data," Ecological Economics, Elsevier, vol. 72(C), pages 106-115.
    2. Robert J. B. Goudie & Sach Mukherjee & Jan-Emmanuel De Neve & Andrew J. Oswald & Stephen Wu, 2011. "Happiness as a Driver of Risk-Avoiding Behavior," CESifo Working Paper Series 3451, CESifo.
    3. Christopher Ambrey & Christopher Fleming, 2014. "Public Greenspace and Life Satisfaction in Urban Australia," Urban Studies, Urban Studies Journal Limited, vol. 51(6), pages 1290-1321, May.
    4. Alpaslan Akay & Corrado Giulietti & Juan Robalino & Klaus Zimmermann, 2014. "Remittances and well-being among rural-to-urban migrants in China," Review of Economics of the Household, Springer, vol. 12(3), pages 517-546, September.
    5. Nattavudh Powdthavee & Warn N. Lekfuangfu & Mark Wooden, 2013. "The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia," Melbourne Institute Working Paper Series wp2013n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Cojocaru, Alexandru, 2014. "Fairness and inequality tolerance: Evidence from the Life in Transition Survey," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 590-608.
    7. Clingingsmith, David, 2016. "Negative Emotions, Income, and Welfare: Casual Estimates from the PSID," SocArXiv fae4x, Center for Open Science.
    8. Clingingsmith, David, 2017. "Negative Emotions, Income, and Welfare: Causal Estimates from the PSID," SocArXiv q2mxt, Center for Open Science.
    9. Abel Brodeur & Sarah Flèche, 2019. "Neighbors' Income, Public Goods, and Well‐Being," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(2), pages 217-238, June.
    10. Luciana Méndez, 2020. "So Dissatisfied to Leave? The Role of Perceptions, Expectations and Beliefs on Youths’ Intention to Migrate: Evidence from a Developing Country," Journal of Happiness Studies, Springer, vol. 21(8), pages 2981-3006, December.
    11. Clingingsmith, David, 2016. "Negative emotions, income, and welfare: Causal estimates from the PSID," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 1-19.
    12. repec:pri:indrel:dsp01cn69m419r is not listed on IDEAS
    13. Li, Qian & Stoeckl, Natalie & King, David, 2019. "Using the life-satisfaction approach to quantify the complex inter-related impacts of coal mining on host communities: A case study in Shanxi, China," Resources Policy, Elsevier, vol. 62(C), pages 305-316.
    14. Christian Pfeifer, 2013. "Life satisfaction and the consumption values of partners and friends: Empirical evidence from German panel survey data," Economics Bulletin, AccessEcon, vol. 33(4), pages 3131-3142.
    15. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
    16. Blanchflower, David G. & Oswald, Andrew J., 2008. "Is well-being U-shaped over the life cycle?," Social Science & Medicine, Elsevier, vol. 66(8), pages 1733-1749, April.
    17. Hye Yoon Chung & Youjin Hahn, 2021. "Work Transitions, Gender, and Subjective Well-Being," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 16(5), pages 2085-2109, October.
    18. Eleftherios Giovanis, 2014. "Relationship between well-being and recycling rates: evidence from life satisfaction approach in Britain," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(2), pages 201-214, July.
    19. Proto, Eugenio & Rustichini, Aldo, 2012. "Life Satisfaction, Household Income and Personality Traits," CAGE Online Working Paper Series 86, Competitive Advantage in the Global Economy (CAGE).
    20. Foliano, Francesca & Tonei, Valentina & Sevilla, Almudena, 2024. "Social restrictions, leisure and well-being," Labour Economics, Elsevier, vol. 87(C).
    21. Rainer Winkelmann, 2005. "Subjective well-being and the family: Results from an ordered probit model with multiple random effects," Empirical Economics, Springer, vol. 30(3), pages 749-761, October.

    More about this item

    Keywords

    Happiness; Health; Industry wage differentials; Intergenerational mobility;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9131. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.