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Determination Of Participation Decision, Hiring Decision, And Wages In A Double Selection Framework: Male‐Female Wage Differentials In The U.S. Labor Market Revisited

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  • MS Mohanty

Abstract

The magnitude of the male‐female wage differential is known to be highly sensitive to the specification of the wage equations used. An important source of misspecification is the failure to correct the sample selection bias that results from estimating the wage equation obtained through two sequential decisions: the worker's decision to participate in the labor market and the employer's decision to hire. Estimation of the wage equation ignoring this double selection process leads to biased estimates, and consequently the resulting male‐female wage differentials are likely to be misleading. Following a double selection approach and using a sample from the National Longitudinal Survey of Youth, this article examines the determinants of not only the wage equation but also the worker's participation and the employer's hiring decisions in both male and female samples. The study further demonstrates that the unexplained male‐female wage differential remains underestimated when the roles of both selection decisions are ignored in the estimation of wage equations.

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  • MS Mohanty, 2001. "Determination Of Participation Decision, Hiring Decision, And Wages In A Double Selection Framework: Male‐Female Wage Differentials In The U.S. Labor Market Revisited," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 197-212, April.
    • Handle: RePEc:bla:coecpo:v:19:y:2001:i:2:p:197-212
    DOI: 10.1111/j.1465-7287.2001.tb00061.x
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    1. Alisher Aldashev & Johannes Gernandt & Stephan L. Thomsen, 2007. "Language Usage, Participation, Employment and Earnings," FEMM Working Papers 07018, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    2. John Baffoe-Bonnie, 2009. "Black–White Wage Differentials in a Multiple Sample Selection Bias Model," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 1-16, March.
    3. Aldashev, Alisher & Gernandt, Johannes & Thomsen, Stephan L., 2009. "Language usage, participation, employment and earnings: Evidence for foreigners in West Germany with multiple sources of selection," Labour Economics, Elsevier, vol. 16(3), pages 330-341, June.
    4. GÓMEZ , Nuria & TOBARRA, María-Ángeles & LÓPEZ, Luis-Antonio, 2014. "Employment Opportunities In Spain: Gender Differences By Education And Ict Usage," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 14(3), pages 105-130.
    5. Baffoe-Bonnie, John & Ezeala-Harrison, Fidelis, 2005. "Incidence and duration of unemployment spells: Implications for the male-female wage differentials," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 824-847, September.
    6. Mohanty, Madhu Sudan, 2012. "Effects of positive attitude and optimism on wage and employment: A double selection approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(3), pages 304-316.
    7. Mohanty, Madhu S., 2009. "Effects of positive attitude on earnings: Evidence from the US longitudinal data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 357-371, March.

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