Explanation: Including 'hours worked' in wage regressions renders the wage earnings equation being transformed into ‘inverse labour supply function’. Therefore, the variable ‘hours worked’ is endogenous and the OLS regression will result in biased estimates (due to endogeneity).
How can this endogeneity be ‘corrected’?
Additional info: I am using the wage regressions in order to performed Oaxaca depositions, for the gender wage gap.
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