| Arthur van Soest, Tilburg University Rosalia Vazquez-Alvarez, Tilburg University and World Health Organization |
| Nonparametric Modeling of the Anchoring Effect in an Unfolding Bracket Design |
| Session: C-12-20 Wednesday 16 August 2000 by Vazquez-Alvarez, Rosalia |
| Household surveys are often plagued by item non-response on economic variables of interest like income, savings or the amount of wealth. Manski (1989,1994, 1995) shows how, in the presence of such non-response, bounds on conditional quantiles of the variable of interest can be derived, allowing for any type of non-random response behavior. Including follow up unfolding brackets reduces item non-response. Recent evidence, however, suggests that such design is vulnerable to a psychometric bias known as the anchoring effect. In this paper, we extend the approach by Manski to derive bounds which do and do not allow for the anchoring effect by means of nonparametric assumptions. These bounds are applied to earnings in the 1996 wave of the Health and Retirement Survey (HRS). We show that categorical questions can be useful to increase precision of the bounds, even if anchoring is allowed for, and use these bounds to detect wage differentials between different educational levels in the population. |