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Two-Step Estimation of Simultaneous Equation Panel Data Models with Censored Endogenous Variables

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Author Info
Vella, F.
Verbeek, M. (Tilburg University, Center for Economic Research)
Abstract

This paper presents some two-step estimators for a wide range of parametric panel data models with censored endogenous variables and sample selection bias. Our approach is to derive estimates of the unobserved heterogeneity responsible for the endogeneity/selection bias to include as additional explanatory variables in the primary equation. These are obtained through a decomposition of the reduced form residuals. The panel nature of the data allows adjustment, and testing, for two forms of endogeneity and/or sample selection bias. Furthermore, it incorporates roles for dynamics and state dependence in the reduced form. Finally, we provide an empirical illustration which features our procedure and highlights the ability to test several of the underlying assumptions.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 55.

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Date of creation: 1994
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Handle: RePEc:dgr:kubcen:199455

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models

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  1. Moffitt, Robert, 1984. "The Estimation of a Joint Wage-Hours Labor Supply Model," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 550-66, October. [Downloadable!] (restricted)
  2. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
  3. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32. [Downloadable!] (restricted)
  4. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-57, May. [Downloadable!] (restricted)
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  6. Newey, Whitney K., 1984. "A method of moments interpretation of sequential estimators," Economics Letters, Elsevier, vol. 14(2-3), pages 201-206. [Downloadable!] (restricted)
  7. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 225-38, January. [Downloadable!] (restricted)
  8. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July. [Downloadable!] (restricted)
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  9. Arellano, M. & Bover, O. & Labeaga, J.M., 1997. "Autoregressive Models with Sample Selectivity for Panel Data," Papers 9706, Centro de Estudios Monetarios Y Financieros-.
  10. 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)
  11. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November. [Downloadable!] (restricted)
  12. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May. [Downloadable!] (restricted)
  13. Amemiya, Takeshi & MaCurdy, Thomas E, 1986. "Instrumental-Variable Estimation of an Error-Components Model," Econometrica, Econometric Society, vol. 54(4), pages 869-80, July. [Downloadable!] (restricted)
  14. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September. [Downloadable!] (restricted)
  15. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Charlier, E. & Melenberg, B. & Soest, A. van, 1997. "An analysis of housing expenditure using semiparametric models and panel data," Discussion Paper 14, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  2. Husted, Leif & Nielsen, Helena Skyt & Rosholm, Michael & Smith, Nina, 2000. "Employment and Wage Assimilation of Male First Generation Immigrants in Denmark," IZA Discussion Papers 101, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Panos, Sousounis, 2009. "The Impact of Work-Related Training on Employee Earnings: Evidence from Great Britain," MPRA Paper 14262, University Library of Munich, Germany. [Downloadable!]
  4. Bilgic, Abdulbaki & Florkowski, Wojciech J., 2006. "Growth Expectations and Decision to Renovate a Golf Course: An Application of a Censored Model with the Simultaneity Test," 2006 Annual meeting, July 23-26, Long Beach, CA 21446, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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