Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set

Judith K. Hellerstein, David Neumark

NBER Working Paper No. 10325
Issued in February 2004
NBER Program(s):Labor Studies, Productivity, Innovation, and Entrepreneurship

In this paper, we first describe the 1990 DEED, the most recently constructed matched employer-employee data set for the United States that contains detailed demographic information on workers (most notably, information on education). We then use the data from manufacturing establishments in the 1990 DEED to update and expand on previous findings, using a more limited data set, regarding the measurement of the labor input and theories of wage determination. We find that the productivity of women is less than that of men, but not by enough to fully explain the gap in wages, a result that is consistent with wage discrimination against women. In contrast, we find no evidence of wage discrimination against blacks. We estimate that both the wage and productivity profiles are rising but concave to the origin (consistent with profiles quadratic in age), but the estimated relative wage profile is steeper than the relative productivity profile, consistent with models of deferred wages. We find a productivity premium for marriage equal to that of the wage premium, and a productivity premium for education that somewhat exceeds the wage premium. Exploring the sensitivity of these results, we also find that different specifications of production functions do not have any qualitative effects on the these results. Finally, the results indicate that the returns to productive inputs (capital, materials, labor quality) as well as the residual variance are virtually unaffected by the choice of the construction of the labor quality input.

download in pdf format
   (358 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10325


Users who downloaded this paper also downloaded* these:
Hellerstein and Neumark Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set
Hellerstein, Neumark, and Troske w5626 Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations
Haltiwanger, Lane, and Spletzer w7994 Wages, Productivity, and the Dynamic Interaction of Businesses and Workers
Van Biesebroeck w13306 Wage and Productivity Premiums in Sub-Saharan Africa
Neumark and Korenman w4019 Sources of Bias in Women's Wage Equations: Results Using Sibling Data
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us