Controls For Individual Heterogeneity Research Articles

Firm Age, Size and Profitability Dynamics: A Test of Learning by Doing and Structural Inertia Hypotheses

The fundamental objective of this paper is to investigate the relationship between company age, company size and profitability against the background of the learning by doing and structural inertia hypotheses. The study population consists of the universe of companies (202) listed on the Nigerian Stock Exchange Market as at December 2014. A sample of 30 firms was scientifically selected for the study. The analysis was carried out using archival data from 2006 to 2012, comprising of 210 observations. The panel data regression analysis is the technique for data analysis. The choice of the technique is premised on its property of increase data points and control for individual heterogeneity. The usual classical regression assumption tests were effected to ensure the accuracy of the regression model. The study finds a significant positive relationship between firm age, firm size and profitability. The control variable of board size reports a negative and insignificant relationship with profitability. The significant positive relationship between company age and profitability, is a confirmation of the learning by doing hypothesis. However, the positive relationship between size and profitability, negates the hypothesis of structural inertia. Against the backdrop of the research findings, we recommend that the management should strive to increase the scale of operation of businesses and by implication, the size of the business to enhance improved reputation and attractiveness.

Effect of Informal Care on Work, Wages, and Wealth

Cross-sectional evidence in the United States finds that informal caregivers have less attachment to the labor force, measured both by the number of hours worked and labor force participation. The causal mechanism is unclear: do children who work less become informal caregivers, or are children who become caregivers working less? Using longitudinal data from the Health and Retirement Study (HRS), this project identifies the relationship between informal care and labor force participation in the United States, both on the intensive and extensive margins, and whether there are wage penalties from informal care. We use our results to examine retirement wealth effects, in particular, changes in Social Security benefits. In our approach we carefully test for endogeneity; control for time invariant individual heterogeneity; and, lastly, explore the effects across key domains of behavior for men and women – stage and duration of care. We find that there are modest decreases – around 2 percentage points – in the likelihood of being in the labor force for caregivers. We find that female caregivers who have longer spells face significant but modest risks of not working, that the negative effect on work for male caregivers occurs right away, and that both male and female caregivers who have ended caregiving are not significantly more likely to work. In addition, wage penalties exist for female caregivers and wage premiums exist for male caregivers. There are minimal expected changes to caregivers’ future Social Security benefits. Finally, despite strong instruments, there is no evidence of endogeneity between informal care and work, suggesting that controlling for individual heterogeneity with fixed effects is a sufficient approach in longitudinal inquiries of informal care’s effect on work and wealth.

Immigrant Heterogeneity and the Earnings Distribution in the United Kingdom and United States: New Evidence from a Panel Data Quantile Regression Analysis

† Abstract. In this paper we use a relatively new panel data quantile regression technique to examine native-immigrant earnings differentials 1) throughout the conditional wage distribution, and 2) controlling for individual heterogeneity. No previous papers have simultaneously considered these factors. We focus on both women and men, using longitudinal data from the PSID and the BHPS. We show that country of origin, country of residence, and gender are all important deter- minants of the earnings differential. For instance, a large wage penalty occurs in the U.S. among female immigrants from non-English speaking countries, and the penalty is most negative among the lowest (conditional) wages. On the other hand, women in Britain experience hardly any immigrant-native wage differential. We find evidence suggesting that immigrant men in the U.S. and the U.K. earn lower wages, but the most significant results are found for British workers emigrating from non-English speaking countries. The various differentials we report in this paper reveal the value of combining quantile regression with controls for individual heterogeneity in better understanding immigrant wage effects.

Controlling for individual heterogeneity in longitudinal models, with applications to student achievement

Longitudinal data tracking repeated measurements on individuals are highly valued for research because they offer controls for unmeasured individual heterogeneity that might otherwise bias results. Random effects or mixed models approaches, which treat individual heterogeneity as part of the model error term and use generalized least squares to estimate model parameters, are often criticized because correlation between unobserved individual effects and other model variables can lead to biased and inconsistent parameter estimates. Starting with an examination of the relationship between random effects and fixed effects estimators in the standard unobserved effects model, this article demonstrates through analysis and simulation that the mixed model approach has a “bias compression” property under a general model for individual heterogeneity that can mitigate bias due to uncontrolled differences among individuals. The general model is motivated by the complexities of longitudinal student achievement measures, but the results have broad applicability to longitudinal modeling.

Learning Curves, Personal Characteristics, and Job Performance

Data on Naval Reserve recruiters are used to estimate the effects of on-the-job learning, experience, and individual characteristics on job performance. Generalizations of the Poisson distribution form the basis for estimating the effects of explanatory variables and control for individual heterogeneity and overdispersion. The findings show strong learning effects during the first 2 years on the job. Furthermore, lower pay-grade individuals have steeper learning curves than individuals in higher pay grades. Estimates of individual differences in productivity show a large variance in unobserved ability.

Accounting for Changes in the Labor Supply of Recently Divorced Women

How much of the rise in women's labor supply associated with divorce can be attributed to observable changes in the wife's environment? Such changes include a reduction in nonwage family income, a rise in her after-tax wage rate, changes in the number of children present, and a reduction in husband's hours at home. We use panel data to address this question. When we do not account for individual effects, we find that changes in observables are important, but a residual effect dependent solely on marital status remains. In estimates that do control for individual heterogeneity, observable changes in the wife's environment account for even less of the total shift in labor supply.