Robust Estimation of Wage Dispersion with Censored Data: An Application to Occupational Earnings Risk and Risk Attitudes

Daniel Pollmann, Thomas Dohmen*, Franz Palm

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Web of Science)

Abstract

We present a semiparametric method to estimate group-level dispersion, which is particularly effective in the presence of censored data. We apply this procedure to obtain measures of occupation-specific wage dispersion using top-coded administrative wage data from the German IAB Employment Sample. We then relate these robust measures of earnings risk to the risk attitudes of individuals working in these occupations. We find that willingness to take risk is positively correlated with the wage dispersion of an individual's occupation.
Original languageEnglish
Pages (from-to)519-540
Number of pages22
JournalDe Economist
Volume168
Issue number4
Early online date17 Sep 2020
DOIs
Publication statusPublished - Dec 2020

JEL classifications

  • c14 - Semiparametric and Nonparametric Methods: General
  • c21 - "Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions"
  • c24 - "Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models"
  • j24 - "Human Capital; Skills; Occupational Choice; Labor Productivity"
  • j31 - "Wage Level and Structure; Wage Differentials"
  • d01 - Microeconomic Behavior: Underlying Principles
  • d81 - Criteria for Decision-Making under Risk and Uncertainty

Keywords

  • Dispersion estimation
  • Earnings risk
  • Censoring
  • Quantile regression
  • Occupational choice
  • Sorting
  • Risk preferences
  • SOEP
  • IABS
  • QUANTILE REGRESSION
  • SAMPLE SELECTION
  • 2-STEP ESTIMATION
  • TOBIT ESTIMATOR
  • AVERSION
  • MODELS
  • TESTS
  • MISSPECIFICATION
  • DETERMINANTS
  • INEQUALITY

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