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Title: Estimation and Testing of Fixed Effect Models: Estimating the Union Wage Effect Using Panel Data
Authors: Jakubson, George
Keywords: union wage effect
panel data models
fixed effects
random effects
Issue Date: 1-Aug-1986
Citation: Review of Economic Studies, Vol. 58, No. 5, October, 1991
Series/Report no.: Working Papers (Princeton University. Industrial Relations Section) ; 208
Abstract: This paper presents estimates of the union wage effect while controlling for person specific unmeasured variables which do not change over time (‘fixed effects‘) as well as specification tests for the person effect models commonly in use. a sample of men from the PSID, we find that controlling for a person effect POSUH in estimates of the union wage effect on the order of 5-81, as opposed to 201 in the cross section. An omnibus test based on an unrestricted reduced form and an instrumental variables test based on a differencing idea provide no evidence against the conventional model. A third test, based on a comparison of those who enter and leave union coverage, does provide evidence against the usual model.
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