Correcting for Sample Selection from Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance

52 Pages Posted: 11 Jul 2016

See all articles by Laurent Lamy

Laurent Lamy

Paris School of Economics (PSE)

Manasa Patnam

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Michael Visser

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: July 2016

Abstract

This paper proposes a method to estimate the relationship between the price of a good sold at auction, and a post-auction outcome which is observed among auction winners. To account for both the endogeneity of the auction price and sample selection, we develop a control function approach based on the non-parametric identification of an auction model. In our application we estimate a performance equation using unique field data on wages earned by cricket players and their game-specific performances. Our empirical strategy benefits from the fact that wages are determined through randomly ordered sequential English auctions: the order in which players are sold acts as an exogenous shifter of wages. We find that the positive correlation between wages and performance comes (almost) exclusively from the selection and endogeneity effects.

Keywords: Sample Selection; Structural Econometrics of Auctions; Wage-Performance Elasticity

JEL Classification: C13, C57, D44, M52

Suggested Citation

Lamy, Laurent and Patnam, Manasa and Visser, Michael, Correcting for Sample Selection from Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance (July 2016). CEPR Discussion Paper No. DP11376, Available at SSRN: https://ssrn.com/abstract=2807787

Laurent Lamy (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Manasa Patnam

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Michael Visser

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
291
PlumX Metrics