The Wage Rate Estimation Using the Heckman Procedure

Abstract

This paper estimates wage rates using the Heckman Procedure and a traditional method. The estimation becomes necessary when the analysis requires a measure of the individual's opportunity cost of time. Since a large fraction of the adults in the sample do not participate in the labor market, the simple estimation by ordinary least squares would cause bias in the coefficients. Labor force participation and the wage determination equations were estimated for men and women from 16 to 71 years old. Most of the coefficients were statistically significant at 10% level and presented the expected signs. It was found an upward biased (in absolute value) estimate for male workers and a downward biased (in absolute value) estimate for the female workers when using the traditional method of estimation.