On Testing Sample Selection Bias Under the Multicollinearity Problem
AbstractThis paper reviews and extends the literature on the finite sample behavior of tests for sample selection bias. Monte Carlo results show that, when the “multicollinearity problem” identified by Nawata (1993) is severe, (i) the t-test based on the Heckman-Greene variance estimator can be unreliable, (ii) the Likelihood Ratio test remains powerful, and (iii) nonnormality can be interpreted as severe sample selection bias by Maximum Likelihood methods, leading to negative Wald statistics. We also confirm previous findings (Leung and Yu, 1996) that the standard regression-based t-test (Heckman, 1979) and the asymptotically efficient Lagrange Multiplier test (Melino, 1982), are robust to nonnormality but have very little power.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Econometric Reviews.
Volume (Year): 24 (2005)
Issue (Month): 4 ()
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Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=107830
Other versions of this item:
- Yamagata. T., 2005. "On Testing Sample Selection Bias under the Multicollinearity Problem," Cambridge Working Papers in Economics 0522, Faculty of Economics, University of Cambridge.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
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