Table 7
The sensitivity of earnings to value added shocks
The first row in Panel A reports the IV estimate of the sensitivity of wages to value added
shocks (bu for permanent shocks and bυ for transitory shocks). J-test is the test of overidentifying
restrictions. F-test is the test of joint insignificance of excluded instruments. E (∆ωyz'∆^>ijt-τ)
is an estimate of the autocovariance of wage shocks of order τ; E (∆εjt∆εjt-τ) an estimate of
the autocovariance of value added shocks of order τ; E (∆ω⅛'t∆εjt-τ) an estimate of the cross-
covariance of wage and value added shocks of order τ. σ^l, σ^, σ∣ and σjl are EWMD estimates
of the variances of value added permanent shocks, value added transitory shocks, wage permanent
shocks and wage transitory shocks, respectively. ρ is an estimate of the MA coefficient of earnings.
buσu
√B[(Δ¾∙t)2]
Asymptotic standard errors are reported in parenthesis. The Ratio is calculated as:
and measures the amount of earnings variability attributable to value added shocks.
Panel A
Permanent |
Transitory |
Sensitivity 0.0599 0.0072
(0.0154) (0.0051)
J-test (р-value) 0.1161 0.3777
F-test (р-value) <0.0001 <0.0001
Panel B
Moment |
Estimate |
Parameter |
Estimate |
E (∆ωijАш,i) |
0.0139 |
0.0229 | |
e (∆шŋ't∆cθijf_i) |
-0.0055 |
συ |
0.0334 |
E (A^ij't∆zjt) |
0.0019 |
σl |
0.0058 |
e (A^ij't∆εjt-1) |
-0.0002 (0.0002) |
σ |
0.0034 |
E (∆ε3 i∆ε, i) |
0.0820 |
ρ |
-0.1606 (0.0863) |
E (∆ε,∙ t∆ε3t-1) |
-0.0310 |
Ratio |
0.0769 |
47
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