selectivity bias

Abstract

Veterans of World War II are widely believed to earn more than
nonveterans of the same age. Theoretical justifications for the World War
II veteran premium include the subsidization of education and training, and
preference for veterans in hiring. In this paper, we propose and test an
alternative view: that the observed World War II veteran premium reflects
the fact that men with higher earnings potential were more likely to have
been selected into the Armed Forces. An empirical strategy is developed
that allows estimation of the effects of veteran status while controlling
for correlation with unobserved earnings potential. The estimation is
based on the fact that from 1942 to 1947 priority for conscription was
determined in chronological order of birth. Information on individuals’
dates of birth may therefore be used to construct instruments for veteran
status. Empirical results from the 1960, 1970, and 1980 Censuses, along
with two other micro data sets, support a conclusion that World War II
veterans earn no more than comparable nonveterans, and may well earn less.
These results suggest that OLS estimates of the World War II veteran
premium are severely biased by nonrandom selection into military service,
and that the civilian labor market experiences of veterans of World War II
were not very different from the experiences of Vietnam-era veterans.

Year of Publication
1989
Number
254
Date Published
06/1989
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol. 12, No. 1, January, 1994
Angrist, J. ., & Krueger, A. . (1989). Why Do World War II Veterans Earn More Than Nonveterans?. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01b8515n37b (Original work published June 1989)
Working Papers
Author
Abstract

This paper develops and applies a new semi-parametric correction for sample-selection in the
context of a multi-market Roy model of mobility and earnings. Instead of workers choosing occupations
as in Roy's paper, this paper formulates a model where individuals choose which of the 50 states in the
U.S. (plus the District of Columbia) to live and work in. The new econometric methodology combines
Lee's (1982) parametric "maximum order statistic" approach to multi-choice selection models with Ahn
and Powell’s (1993) more recent work on "single-index" models. The resulting correction requires no
assumptions on the joint distribution of the error terms in the outcome and multiple selection equations
and can easily be adapted to a variety of other polychotomous choice problems. The empirical work,
which uses Census data for I980 and 1990, confirms the role of comparative advantage in mobility
decisions. The results suggest that self-selection of higher educated people to states with higher returns
to education generally leads to downward biases in the returns to education in state-specific labor
markets. I also find that state-to-state migration flows respond strongly to differences in the return to
education and amenities across states.

Year of Publication
1997
Number
381
Date Published
05/1997
Publication Language
eng
Citation Key
Econometrica , Vol. 70, No. 6, November, 2002
Dahl, G. . (1997). Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01tt44pm85v (Original work published May 1997)
Working Papers