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Maximum Likelihood Estimation of Endogenous Switching And Sample Selection Models for Binary, Count, And Ordinal Variables

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Author Info
Alfonso Miranda () (Department of Economics, Keele,)
Sophia Rabe-Hesketh (Graduate Schoolof Education,)

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Abstract

Studying behaviour in economics, sociology, and statistics often involves fitting models in which the response variable depends on a dummy variable (also known as a regime switch variable) or in which the response variable is observed only if a particular selection condition is met. In either case, standard regression techniques deliver inconsistent estimators if unobserved factors that affect the response are correlated with unobserved factors that affect the switching or selection variable. Consistent estimators can be obtained by maximum likelihood estimation of a joint model of the outcome and switching or selection variable. This paper describes a ‘wrapper’ program, ssm, that calls gllamm (Rabe-Hesketh et al. 2004a) to fit such models. The wrapper accepts data in a simple structure, has a straightforward syntax, and reports output in a manner that is easily interpretable. One important feature of ssm is that the log-likelihood can be evaluated using adaptive quadrature (Rabe- Hesketh and Skrondal 2002; Rabe-Hesketh et al. 2005)

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Publisher Info
Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2005/14.

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Length: 34 pages
Date of creation: Dec 2005
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Publication status: Published in the STATA Journal, 6(3), 2006, pages 285-308. http://www.stata-journal.com/abstracts/st0107.pdf
Handle: RePEc:kee:kerpuk:2005/14

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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

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Related research
Keywords: Endogenous switching; sample selection; binary variable; count data; ordinal variable; probit; poisson regression; adaptive quadrature; gllamm; wrapper; ssm.;

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
I12 - Health, Education, and Welfare - - Health - - - Health Production

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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. Sophia Rabe-Hesketh, 2002. "Multilevel selection models using gllamm," Dutch-German Stata Users' Group Meetings 2002 1, Stata Users Group. [Downloadable!]
  2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  3. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2002. "Reliable estimation of generalized linear mixed models using adaptive quadrature," Stata Journal, StataCorp LP, vol. 2(1), pages 1-21, February. [Downloadable!]
  4. Wilde, Joachim, 2000. "Identification of multiple equation probit models with endogenous dummy regressors," Economics Letters, Elsevier, vol. 69(3), pages 309-312, December. [Downloadable!] (restricted)
  5. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2003. "Maximum likelihood estimation of generalized linear models with covariate measurement error," Stata Journal, StataCorp LP, vol. 3(4), pages 386-411, December. [Downloadable!]
  6. 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)
  7. Alfonso Miranda & Massimiliano Bratti, 2006. "Non-Pecuniary Returns to Higher Education:," IZA Discussion Papers 2090, Institute for the Study of Labor (IZA). [Downloadable!]
  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)
    Other versions:
  9. Van de Ven, Wynand P. M. M. & Van Praag, Bernard M. S., 1981. "The demand for deductibles in private health insurance : A probit model with sample selection," Journal of Econometrics, Elsevier, vol. 17(2), pages 229-252, November. [Downloadable!] (restricted)
  10. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2004. "Generalized multilevel structural equation modeling," Psychometrika, Springer, vol. 69(2), pages 167-190, June. [Downloadable!] (restricted)
  11. Alfonso Miranda, 2004. "FIML estimation of an endogenous switching model for count data," Stata Journal, StataCorp LP, vol. 4(1), pages 40-49, March. [Downloadable!]
    Other versions:
  12. Donald S. Kenkel & Joseph V. Terza, 2001. "The effect of physician advice on alcohol consumption: count regression with an endogenous treatment effect," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(2), pages 165-184. [Downloadable!]
  13. Terza, Joseph V., 1998. "Estimating count data models with endogenous switching: Sample selection and endogenous treatment effects," Journal of Econometrics, Elsevier, vol. 84(1), pages 129-154, May. [Downloadable!] (restricted)
  14. Alfonso Miranda, 2005. "Estimation of ordinal response models, accounting for sample selection bias," United Kingdom Stata Users' Group Meetings 2005 11, Stata Users Group. [Downloadable!]
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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. Mª Beatriz Corchuelo Martínez-Azúa & Ester Martínez Ros, 2008. "Application of R & D fiscal incentives in Spanish manufacturing firms," Hacienda Pública Española, IEF, vol. 187(4), pages 9-39, December. [Downloadable!]
  2. César Alonso-Borrego & Antonio Romero-Medina, 2008. "Students’ Assessment of Higher Education in Spain," Working Papers 2008-31, FEDEA. [Downloadable!]
    Other versions:
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