Sullivan, Paul. 2009. “Estimation of an Occupational Choice Model when Occupations are Misclassified.” Journal of Human Resources 44(2): 495–535.
This paper develops an empirical occupational choice model that corrects for misclassification in occupational choices and measurement error in occupation-specific work experience. The model is used to estimate the extent of measurement error in occupation data and quantify the bias that results from ignoring measurement error in occupation codes when studying the determinants of occupational choices and estimating the effects of occupation-specific human capital on wages. The parameter estimates reveal that 9 percent of occupational choices in the 1979 cohort of the NLSY are misclassified. Ignoring misclassification leads to biases that affect the conclusions drawn from empirical occupational choice models.
Paul Sullivan is a research economist at the U.S. Bureau of Labor Statistics. The author thanks John Bound, two anonymous referees, and seminar participants at Virginia, the BLS, and the Annual Meeting of the Society of Labor Economists for comments that greatly improved this paper. Financial support from a National Institute on Aging Post-Doctoral Fellowship (grant number AG00221-14) at the University of Michigan is gratefully acknowledged. The views and opinions expressed in this paper are those of the author and do not necessarily reflect the views of the Bureau of Labor Statistics. The data used in this article can be obtained beginning October 2009 through September 2012 from Paul J. Sullivan, U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Suite 3105, Washington, D.C. 20212-0001, Sullivan.Paul.Joseph@bls.gov.