A Principled Approach to Assessing Missing-Wage Induced Selection Bias

Abstract

Multiple imputation (MI) techniques are applied to simulate missing wage rates of nonworking wives under the missing-at-random (MAR) condition. The assumed selection effect of the labour force participation decision is framed as deviations of the imputed wage rates from MAR. By varying the deviations, we assess the severity of subsequent selection bias in standard human capital models through sensitivity analyses (SA). Our experiments show that the bias remains largely insignificant. While similar findings are possibly attainable through the Heckman procedure, SA under the MI approach provides a more structured and principled approach to assessing selection bias.

Keywords: wage, labour supply, selection, missing at random, multiple imputation

JEL Classification: C21, C52, J20, J24