Robust Estimation of Wage Dispersion with Censored Data: An Application to Occupational Earnings Risk and Risk Attitudes

25 Pages Posted: 31 Jul 2013

See all articles by Daniel Pollmann

Daniel Pollmann

Harvard University - Department of Economics; Maastricht University - Research Centre for Education and the Labour Market (ROA)

Thomas J. Dohmen

Institute for the Study of Labor (IZA); Maastricht University - Business Investment Research Center (BIRC)

Franz C. Palm

University of Maastricht - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: July 31, 2013

Abstract

We present a semiparametric method to estimate group-level dispersion, which is particularly effective in the presence of censored data. We apply this procedure to obtain measures of occupation-specific wage dispersion using top-coded administrative wage data from the German IAB Employment Sample (IABS). We then relate these robust measures of earnings risk to the risk attitudes of individuals working in these occupations. We find that willingness to take risk is positively correlated with the wage dispersion of an individual’s occupation.

Keywords: dispersion estimation, earnings risk, censoring, quantile regression, occupational choice, sorting, risk preferences, SOEP, IABS

JEL Classification: C14, C21, C24, J24, J31, D01, D81

Suggested Citation

Pollmann, Daniel and Dohmen, Thomas and Palm, Franz C., Robust Estimation of Wage Dispersion with Censored Data: An Application to Occupational Earnings Risk and Risk Attitudes (July 31, 2013). SOEPpaper No. 572. Available at SSRN: https://ssrn.com/abstract=2304092 or http://dx.doi.org/10.2139/ssrn.2304092

Daniel Pollmann (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

Thomas Dohmen

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Maastricht University - Business Investment Research Center (BIRC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-43-388 3832 (Phone)
+31-43-388 4856 (Fax)

Franz C. Palm

University of Maastricht - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-(0)43-3883833 (Phone)
+31-(0)43-3258535 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

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