An Analysis on Danish Micro Data - School of Economics and ...

estimation. <strong>An</strong>d again having a short education compared to the reference category of a basic
education has a positive effect on employment, that amounts to 71.06 percentage points in the
random effects probit estimation.
The pseudo R 2 in table 6 is the measure of goodness of fit that was reported with the probit
estimations and is displayed here for informative reasons. These are virtually the same as the ones
reported in table 3 for the estimations with a binary explanatory variable. This is not really
surprising, since the included explanatory variable in table 6 is a different measure of the same
variable that is applied in table 3. Furthermore the same control variables are applied and the
models are estimated on unchanged sample sizes.
Likewise to section 6.1 a test of endogeneity is performed. Because the explanatory variable in this
case is continuous, the test is carried out by including the saved residuals of the auxiliary regression
in the equation of interest. In the probit on year 2003 and the pooled probit estimation the
coefficient on the saved residuals cannot be rejected to be equal to zero, which means that
exogeneity cannot be rejected. In the random effects probit model, it is not possible to save the
residuals from the auxiliary regression and therefore the generalised residual is calculated as
described in chapter 5 and included in the equation of interest. A likelihood-ratio test is performed
and with a χ 2 (1)-value of 0.92[0.3367] the null hypothesis of exogeneity can once again not be
rejected. The test is included in the appendices.
The random effects probit estimation is tested for sample selection as done in section 6.1, and with
a coefficient of the lag of the selection indicator of -0.0949 and a standard error of 0.1627 the null
hypothesis of no sample selection bias cannot be rejected. 71 That is, the sample selection does not
cause the results to be biased.
The estimate of ρ, the magnitude of the unobserved effect, for the random effects estimation
displayed in column 3 in table 6 is equal to 0.8080 with a standard error of 0.0246. A likelihoodratio
test testing whether ρ is equal to 0 is rejected at a significance level of 1 %. It can therefore
once again not be rejected that there is an unobserved effect present in the data.
6.3 Labour force participants
All the previous estimations do not distinguish between labour market statuses. That is, the
probability of being employed is estimated for all women, regardless of whether they are in the
labour force or not. It can be argued that it is not that relevant to try and estimate the effect of
71 The p-value is 0.560
58