Collinearity and Two-Step Estimation of Sample Selection Models: Problems, Origins, and Remedies
AbstractThis paper investigates the origins of the collinearity problems encountered in the two-step estimation method for sample selection models. The analysis reveals several critical misconceptions and deficiencies in the literature. Remedies to the collinearity problems are proposed and evaluated. Monte Carlo experiments as well as an empirical example based on Mroz‘s (1987) data are used to illustrate the practical relevance and importance of the analysis.
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Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 15 (2000)
Issue (Month): 3 (June)
sample selection; Heckman's two-step method; collinearity problem; remedy; Monte Carlo experiment; wage equation;
Other versions of this item:
- Leung, S.F. & Yu, S., 1996. "Collinearity and Two-Step Estimation of Sample Selection Models: Problems, Origins and Remedies," RCER Working Papers 419, University of Rochester - Center for Economic Research (RCER).
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
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