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Susan Murphy to speak at U-M kickoff for data science initiative, Oct 6, Rackham

Andrew Goodman-Bacon, former trainee, wins 2015 Nevins Prize for best dissertation in economic history

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Bob Willis awarded 2015 Jacob Mincer Award for Lifetime Contributions to the Field of Labor Economics

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Joe Grengs: Policy & planning for transportation equity

Implications of Mean-Reverting Measurement Error for Longitudinal Studies of Wages and Employment

Archived Abstract of Former PSC Researcher

Kim, B., and Gary Solon. 2005. "Implications of Mean-Reverting Measurement Error for Longitudinal Studies of Wages and Employment." Review of Economics and Statistics, 87(1): 193-196.

This note examines the implications of mean-reverting measurement error for two influential literatures based on longitudinal survey data: (1) the literature on real wage variation over the business cycle and (2) the literature on intertemporal substitution in labor supply. Accounting for mean-reverting measurement error suggests that real wages may be even more procyclical than indicated by recent longitudinal studies. We also find that the instrumental variables estimator commonly used in intertemporal substitution studies is inconsistent if changes in earnings and hours of work are measured with different degrees of mean reversion, but the magnitude of the resulting inconsistency appears to be small.

DOI:10.1162/0034653053327685 (Full Text)

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