Compensating Differentials and Self-selection: An Application to Lawyers

This paper models individual choice between two types of jobs as dependent on the difference i n potential earnings and on preferences for nonpecuniary compensation. The model leads to simultaneous estimation of earnings and job choice functions in a manner that takes account of self-selection of individuals into the sector of highest utility. An application to lawyers choosing between private and "public-interest" law casts doubt on the notion that public-interest lawyers are accepting substantially lower earnings by virtue of their choice-an impression derived from es timation of earnings functions without accounting for self-selection. The estimation technique also takes proper account of the "'choice-based" nature of the sample. Copyright 1988 by University of Chicago Press.