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Finite sample behavior of two step estimators in selection models

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Author Info
Ana Fernandez-Sainz () (Departamento de Econometria y Estadistica, Universidad del Pais Vasco, Spain)
Juan M. Rodriguez-Poo () (Departamento de Economia, Universidad de Cantabria, Spain)
Inmaculada Villanua Martin (Departamento de Economia, Universidad de Cantabria, Spain)
Abstract

The problem of specification errors in sample selection models has received considerable attention both theoretically and empirically. However, very few is known about the finite sample behavior of two step estimators. In this paper we investigate by simulations both bias and finite sample distribution of these estimators when ignoring heteroskedasticity in the sample selection mechanism. It turns out that under conditions traditionally faced by practitioners, the misspecified parametric two step estimator (Heckman, 1979) performs better, in finite sample sizes, than the robust semiparametric one (Ahn and Powell, 1993). Moreover, under very general conditions, we show that the asymptotic bias of the parametric two step estimator is linear in the covariance between the sample selection and the participation equation.

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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 199906.

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Date of creation: 03 Jun 1999
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Handle: RePEc:ehu:biltok:199906

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research
Keywords: Sample selection models; Finite sample analysis; Misspecification error; Heteroskedasticity; Heckman two step estimator; semiparametric models;

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models

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References listed on IDEAS
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. Olsen, Randall J, 1980. "A Least Squares Correction for Selectivity Bias," Econometrica, Econometric Society, vol. 48(7), pages 1815-20, November. [Downloadable!] (restricted)
  2. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-18, May.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. Arabmazar, Abbas & Schmidt, Peter, 1981. "Further evidence on the robustness of the Tobit estimator to heteroskedasticity," Journal of Econometrics, Elsevier, vol. 17(2), pages 253-258, November. [Downloadable!] (restricted)
  5. G.S. Maddala & Forrest D. Nelson, 1975. "Specification Errors in Limited Dependent Variable Models," NBER Working Papers 0096, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Melenberg, Bertrand & van Soest, Arthur, 1996. "Parametric and Semi-parametric Modelling of Vacation Expenditures," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 59-76, Jan.-Feb.. [Downloadable!] (restricted)
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  7. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July. [Downloadable!] (restricted)
  8. Hurd, Michael, 1979. "Estimation in truncated samples when there is heteroscedasticity," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 247-258. [Downloadable!] (restricted)
  9. Andrews, Donald W K & Schafgans, Marcia M A, 1998. "Semiparametric Estimation of the Intercept of a Sample Selection Model," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 497-517, July. [Downloadable!] (restricted)
  10. Ahn, Hyungtaik & Powell, James L., 1993. "Semiparametric estimation of censored selection models with a nonparametric selection mechanism," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 3-29, July. [Downloadable!] (restricted)
  11. Arabmazar, Abbas & Schmidt, Peter, 1982. "An Investigation of the Robustness of the Tobit Estimator to Non-Normality," Econometrica, Econometric Society, vol. 50(4), pages 1055-63, July. [Downloadable!] (restricted)
  12. Marcia M Schafgans, 1997. "Semiparametric Estimation of a Sample Selection Model: A Simulation Study," STICERD - Econometrics Paper Series /1997/326, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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(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. Olivier Dagnelie & Philippe LeMay-Boucher, 2008. "Rosca Participation in Benin: a Commitment Issue," UFAE and IAE Working Papers 735.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  2. Olivier Dagnelie & Philippe LeMay-Boucher, 2007. "ROSCA Participation in Benin: A Commitment Issue," CERT Discussion Papers 0708, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
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