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Robust Misspecification Tests for the Heckman's Two-Step Estimator

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  • Gabriel Montes-Rojas

Abstract

This article constructs and evaluates Lagrange multiplier (LM) and Neyman's C(α) tests based on bivariate Edgeworth series expansions for the consistency of the Heckman's two-step estimator in sample selection models, that is, for marginal normality and linearity of the conditional expectation of the error terms. The proposed tests are robust to local misspecification in nuisance distributional parameters. Monte Carlo results show that testing marginal normality and linearity of the conditional expectations separately have a better size performance than testing bivariate normality. Moreover, the robust variants of the tests have better empirical size than nonrobust tests, which determines that these tests can be successfully applied to detect specific departures from the null model of bivariate normality. Finally, the tests are applied to women's labor supply data.

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  • Gabriel Montes-Rojas, 2011. "Robust Misspecification Tests for the Heckman's Two-Step Estimator," Econometric Reviews, Taylor & Francis Journals, vol. 30(2), pages 154-172.
    • Handle: RePEc:taf:emetrv:v:30:y:2011:i:2:p:154-172
    DOI: 10.1080/07474938.2011.534035
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    Cited by:

    1. Riccardo LUCCHETTI & Claudia PIGINI, 2011. "Conditional Moment Tests for Normality in Bivariate Limited Dependent Variable Models: a Monte Carlo Study," Working Papers 357, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    2. Riccardo Lucchetti & Claudia Pigini, 2013. "A test for bivariate normality with applications in microeconometric models," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 22(4), pages 535-572, November.
    3. Claudia PIGINI, 2012. "Of Butterflies and Caterpillars: Bivariate Normality in the Sample Selection Model," Working Papers 377, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Michael Pfaffermayr, 2014. "A GMM-Based Test for Normal Disturbances of the Heckman Sample Selection Model," Econometrics, MDPI, vol. 2(4), pages 1-18, October.
    5. Mikhail Zhelonkin & Marc G. Genton & Elvezio Ronchetti, 2016. "Robust inference in sample selection models," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 78(4), pages 805-827, September.
    6. Seonho Shin, 2022. "To work or not? Wages or subsidies?: Copula-based evidence of subsidized refugees’ negative selection into employment," Empirical Economics, Springer, vol. 63(4), pages 2209-2252, October.

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