This article is a substantially revised version of Chapter 2 of the author's Ph.D. dissertation. The author thanks Professor Edi Karni and Professor Will Carrington for their valuable comments and for their guidance throughout the author's Ph.D. program at Johns Hopkins University. The author also thanks Professor Robert Moffitt for his generous help on some important econometrics issues. Finally, the author thanks the editor for his encouragement of the revision of this paper and two anonymous referees for their valuable comments that have led to substantial improvement in the content of this paper. All errors in this paper are, of course, the author's own.