Econometric Methods for Understanding Matched Employer-Employee Data and Intergenerational Mobility

University Of Chicago, Chicago IL

Investigators

Abstract

This award will fund a research program that will use three projects to develop improved econometric methods for understanding earnings heterogeneity in matched employer-employee data and intergenerational mobility in large administrative registers. The first project will re-examine understanding of the role firms and worker differences play in earnings heterogeneity -- the idea that earning heterogeneity stems from differences in wages across firms as well differences in worker productivity. The researchers will examine in detail the extent to which these conclusions rely on assumptions about worker mobility and the way in which their wages depend on the changes on employment across firms. The second project will conduct a similar exercise, but the focus will be on understanding intergenerational mobility. The third project will propose improvements in the methodology for ranking of places that are constructed by introducing new selection techniques and new error terms in order to provide a better explanation that does not rely on these special assumptions. The results of this research will improve methods of studying wage heterogeneity and intergenerational mobility and thus provide strategy inputs. This award funds a research project to develop econometric methods to quantify the importance of firm heterogeneity, worker heterogeneity, and worker sorting for earning heterogeneity and intergenerational mobility. The core of the research project is a re-examination of the assumptions underlying the econometric models to study wage heterogeneity and intergenerational mobility. The research consists of three projects. The first project re-examines the role of firm heterogeneity, worker heterogeneity, worker sorting, wage dynamics, and geographical mobility in determining earning heterogeneity. The second project will use the same methodology to study intergenerational mobility. The third project will propose improvements in which confidence sets for ranking places of mobility will be constructed by exploiting moment selection techniques and by introducing new error rates based on generalized error rates that arise in multiple testing. The results of this research will improve methods studying of wage heterogeneity and intergenerational mobility and will therefore provide inputs into strategies to reduce wage heterogeneity and increase intergenerational mobility. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.