Estimating the Variance of Wages in the Presence of Selection and Unobserved Heterogeneity

I. Observed Wage Inequality A. Permanent Component .218 .214 .267 .292 .078 (.026) (.014) (.028) (.022) [.000] Diff. in Permanent Component — .004 .053 .025 [.000] [.000] [.000] B. Transitory Component .293 .197 .233 .221 .024 Age 25–30 .242 .143 .177 .166 [.000] Age 31–36 .320 .221 .254 .244 Age 37–42 .331 .232 .266 .255 Diff. in Transitory Component — .096 .036 -.012 [.000] [.008] [.215] Observed Inequality (A B) .511 .411 .500 .513 .102 (.058) (.021) (.054) (.038) [.000] Diff. in Total Observed Inequality — .100 .089 .013 [.000] [.001] [.364] II. Potential Wage Inequality C. Permanent Component .284 .242 .274 .356 .114 –Adjusted for Selection and Truncation Biases (.043) (.022) (.035) (.036) [.000] Marginal Effect of Education on Permanent Component — .042 .032 .082 [.144] [.198] [.030] D. Transitory Component (Same as B) Potential Wage Inequality (C D) .577 .439 .507 .577 .138 (.067) (.026) (.056) (.069) [.003] Marginal Effect of Education on Potential Wage Inequality — .138 .068 .070 [.020] [.122] [.152] III. Wage Uncertainty E. Correlation Coefficient .568 .371 .190 .543 .172 (.094) (.095) (.084) (.084) [.000] Diff. in Correlation Coefficient — .197 .181 .353 [.001] [.000] [.000] F. Permanent Component (C C E2) .192 .209 .264 .251 .042 –Accounted for Unobs. Schooling Factor (.033) (.014) (.033) (.025) [.054] Marginal Effect of Education on Permanent Component — .017 .055 .013 [.314] [.061] [.384] G. Transitory Component (Same as B) Degree of Wage Uncertainty (F G) .485 .406 .497 .472 .066 (.059) (.021) (.054) (.039) [.063] Marginal Effect of Education on Wage Uncertainty — .079 .091 .025 [.101] [.058] [.358] Unobserved Heterogeneity (C D F G) .092 .033 .010 .105 .072 (.041) (.021) (.010) (.042) [.003] Marginal Effect of Education on Unobserved Heterogeneity — .058 .023 .095 [.014] [.036] [.003]