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Production Function and Wage Equation Estimation with Heterogeneous Labor

Production Function and Wage Equation Estimation with Heterogeneous Labor

Evidence from a New Matched Employer-Employee Data Set

Chapter:
(p.31) 2 Production Function and Wage Equation Estimation with Heterogeneous Labor
Source:
Hard-to-Measure Goods and Services
Author(s):
Judith K. HellersteinDavid Neumark
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226044507.003.0003

This chapter first describes a recently constructed matched employer-employee data set for the United States that contains detailed demographic information on workers. This data set, known as the 1990 Decennial Employer-Employee Dataset (1990 DEED), is a match between the 1990 Decennial Long Form of the Census of Population and the 1990 Standard Statistical Establishment List. The data from manufacturing establishments in the 1990 DEED are then used to update and expand on previous findings regarding the measurement of labor input and theories of wage determination. Finally, the chapter examines estimates of some of the key characteristics of production functions and how sensitive they are to the specification and measurement of labor input. The results suggest that collecting detailed data on workers in manufacturing establishments is useful for testing models of wage determination, where in order to formally test these models, one needs information on relative productivities of workers of different types. But the results also indicate that this detailed information on establishments' workforces is not a necessary component to the estimation of the rest of the production function.

Keywords:   labor input, wage determination, manufacturing establishments, production function

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