Proxying Ability by Family Background in Returns to Schooling Estimations is Generally a Bad Idea
2008 (English)In: Scandinavian Journal of Economics, ISSN 0347-0520, E-ISSN 1467-9442, Vol. 110, no 4, 853-875 p.Article in journal (Refereed) Published
When schooling is measured with error and data on ability are lacking, return to schooling estimates will be subject to positive omitted variable bias (OVB) and negative measurement error bias (MEB). We investigate how these biases are affected when ability is proxied by family background variables. We show that the effect on OVB is uncertain, while MEB invariably increases in magnitude. Our empirical analysis demonstrates that MEB generally dominates OVB. With more background variables or increased measurement error, the total bias rapidly becomes negative and increasing in magnitude, thereby driving the return estimate further and further away from the true value.
Place, publisher, year, edition, pages
2008. Vol. 110, no 4, 853-875 p.
Consistent estimates of omitted variable bias and measurement error bias, Measurement error, Missing data, Proxy variables
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-108511DOI: 10.1111/j.1467-9442.2008.00564.xISI: 000261274300011OAI: oai:DiVA.org:uu-108511DiVA: diva2:236086