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On the Proper Use of Ordinal Variables in Labour Market Models

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  • Leslie, Derek

Abstract

Labor economists frequently use variables in their economic models which at best should be considered as ordinal not cardinal concepts. Two good examples are human capital and effort. Martin Currie and Ian Steedman have suggested that many economists improperly treat such variables as being cardinal. Consequently, Currie and Steedman claim that many such models are seriously deficient. The present note puts forward a rule for determining whether it is proper to use an ordinal variable in a labor market model. It is shown that in one of their examples the ordinal variable under consideration, namely effort, would pass the test. In another case I show that the variable, namely human capital, would fail. Each usage of an ordinal variable must be judged on a case-by-case basis. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Leslie, Derek, 1995. "On the Proper Use of Ordinal Variables in Labour Market Models," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(2), pages 196-205, June.
    • Handle: RePEc:bla:manch2:v:63:y:1995:i:2:p:196-205
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    Cited by:

    1. K Clark & M Tomlinson, 2001. "The Determinants of Work Effort: Evidence from the Employment in Britain Survey," Economics Discussion Paper Series 0113, Economics, The University of Manchester.
    2. Kjell Hausken, 2019. "Principal–Agent Theory, Game Theory, and the Precautionary Principle," Decision Analysis, INFORMS, vol. 16(2), pages 105-127, June.
    3. David Spencer, 2002. "Shirking the Issue? Efficiency wages, work discipline and full employment," Review of Political Economy, Taylor & Francis Journals, vol. 14(3), pages 313-327.

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