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The Behavior of the Maximum Likelihood Estimator of Dynamic Panel Data Sample Selection Models

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Author Info
Wladimir Raymond ()
Pierre Mohnen ()
Franz Palm ()
Sybrand Schim van der Loeff ()

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Abstract

This paper proposes a method to implement maximum likelihood estimation of the dynamic panel data type 2 and 3 tobit models. The likelihood function involves a two-dimensional indefinite integral evaluated using “two-step” Gauss-Hermite quadrature. A Monte Carlo study shows that the quadrature works well in finite sample for a number of evaluation points as small as two. Incorrectly ignoring the individual effects, or the dependence between the initial conditions and the individual effects results in an overestimation of the coefficients of the lagged dependent variables. An application to incremental and radical product innovations by Dutch business firms illustrates the method.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1992.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1992

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Find related papers by JEL classification:
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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  1. George-Levi Gayle & Christelle Viauroux, . "Root-N Consistent Semiparametric Estimators of a Dynamic Panel Sample Selection Model," GSIA Working Papers 2004-E62, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
    Other versions:
  2. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier. [Downloadable!] (restricted)
    Other versions:
  3. Hausman, Jerry A & Wise, David A, 1979. "Attrition Bias in Experimental and Panel Data: The Gary Income Maintenance Experiment," Econometrica, Econometric Society, vol. 47(2), pages 455-73, March. [Downloadable!] (restricted)
  4. Lee, Myoung-jae, 2001. "First-difference estimator for panel censored-selection models," Economics Letters, Elsevier, vol. 70(1), pages 43-49, January. [Downloadable!] (restricted)
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  8. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October. [Downloadable!] (restricted)
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    Other versions:
  11. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 225-38, January. [Downloadable!] (restricted)
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  16. Dustmann, Christian & Rochina-Barrachina, María Engracia, 2000. "Selection Correction in Panel Data Models: An Application to Labour Supply and Wages," IZA Discussion Papers 162, Institute for the Study of Labor (IZA). [Downloadable!]
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    Other versions:
  19. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May. [Downloadable!] (restricted)
  20. Ai, Chunrong & Chen, Chaoying, 1992. "Estimation of a fixed effects bivariate censored regression model," Economics Letters, Elsevier, vol. 40(4), pages 403-406, December. [Downloadable!] (restricted)
  21. Guilkey, David K. & Murphy, James L., 1993. "Estimation and testing in the random effects probit model," Journal of Econometrics, Elsevier, vol. 59(3), pages 301-317, October. [Downloadable!] (restricted)
  22. Nijman, Theo & Verbeek, Marno, 1992. "Nonresponse in Panel Data: The Impact on Estimates of a Life Cycle Consumption Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(3), pages 243-57, July-Sept. [Downloadable!] (restricted)
  23. William Greene, 2004. "Convenient estimators for the panel probit model: Further results," Empirical Economics, Springer, vol. 29(1), pages 21-47, January. [Downloadable!] (restricted)
    Other versions:
  24. Verbeek, Marno, 1990. "On the estimation of a fixed effects model with selectivity bias," Economics Letters, Elsevier, vol. 34(3), pages 267-270, November. [Downloadable!] (restricted)
  25. Raes Anneloes M.L. & Heijltjes Mariëlle G. & Glunk Ursula & Roe Robert A., 2006. "Conflict, Trust, and Effectiveness in Teams Performing Complex Tasks: A Study of Temporal Patterns," Research Memoranda 008, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  26. Kyriazidou, Ekaterini, 2001. "Estimation of Dynamic Panel Data Sample Selection Models," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 543-72, July.
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