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Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure

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Author Info
Akay, Alpaslan () (Department of Economics, School of Business, Economics and Law, Göteborg University)
Tsakas, Elias () (Department of Economics, School of Business, Economics and Law, Göteborg University)

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Abstract

In this paper we discuss the differences between the average marginal effect and the marginal effect of the average individual in sample selection models, estimated by Heckman's two step procedure. We show that the bias that emerges as a consequence of interchanging them, could be very significant, even in the limit. We suggest a computationally cheap approximation method, which corrects the bias in a large extent. We illustrate the implications of our method with an empirical application of earnings assimilation and a small Monte Carlo simulation.

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File URL: http://hdl.handle.net/2077/2667
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Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number 239.

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Length: 16 pages
Date of creation: 19 Jan 2006
Date of revision:
Publication status: Forthcoming in Applied Economics.
Handle: RePEc:hhs:gunwpe:0239

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Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research
Keywords: Heckman's two step estimator; average marginal effect; marginal effect of the average individual; earnings assimilation;

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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References listed on IDEAS
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  1. Atanu Saha & Oral Capps & Patrick J. Byrne, 1997. "Calculating marginal effects in models for zero expenditures in household budgets using a Heckman-type correction," Applied Economics, Taylor and Francis Journals, vol. 29(10), pages 1311-1316, October. [Downloadable!] (restricted)
  2. Saha, Atanu & Capps, Oral & Byrne, Patrick J, 1997. "Calculating Marginal Effects in Dichotomous-Continuous Models," Applied Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 181-85, March. [Downloadable!] (restricted)
  3. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October. [Downloadable!] (restricted)
  4. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  5. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October. [Downloadable!] (restricted)
  6. Saha, Atanu & Capps, Oral, Jr & Byrne, Patrick J, 1997. "Calculating Marginal Effects in Models for Zero Expenditures in Household Budgets Using a Heckman-Type Correction," Applied Economics, Taylor and Francis Journals, vol. 29(10), pages 1311-16, October. [Downloadable!] (restricted)
  7. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier. [Downloadable!] (restricted)
  8. Pål Longva & Oddbjørn Raaum, 2003. "Earnings assimilation of immigrants in Norway – A reappraisal," Journal of Population Economics, Springer, vol. 16(1), pages 177-193, 02. [Downloadable!] (restricted)
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