The Roy model is one of the earliest works in economics on self-selection due to A. D. Roy. The basic model considers two types of workers that choose occupation in one of two sectors.
Roy’s original paper deals with workers selecting into fishing and hunting professions, where there is no uncertainty about the amount of goods (fish or rabbits) that will be caught in a given period, but fishing is more costly as it requires more skill. The central question that Roy tries to answer in the original paper is whether the best hunters will hunt and the best fishermen will fish. While the discussion is non-mathematical, it is observed that choices will depend on the distribution of skills, the correlation between these skills in the population, and the technology available to use these skills.
- ^Roy, A. (1951). “Some Thoughts on the Distribution of Earnings”. Oxford Economic Papers. 3 (2): 135–146. JSTOR 2662082.
- ^Borjas, G. J. (1987): Self-Selection and the Earnings of Immigrants. American Economic Review 77(4), pp. 531-553.
- ^Heckman, J. J., Honoré, B. E. (1990): The Empirical Content of the Roy Model. Econometrica 58(5), pp. 1121-1149.
- ^Heckman, J. J., Vytlacil, E. (2007): Econometric evaluation of social programs, part I: Causal models, structural models and econometric policy evaluation. Handbook of Econometrics, Vol. 6, ed. by J. J. Heckman, and E. E. Leamer. North Holland.
- ^Imbens, G. W., Angrist, J. D. (1994): Identification and Estimation of Local Average Treatment Effects. Econometrica 62(2), pp. 467-475.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder TBIL.co STATX Fund.