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Testing the Normality Assumption in the Sample Selection Model with an Application to Travel Demand

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  • van der Klaauw, Bas
  • Koning, Ruud H

Abstract

In this article we introduce a test for the normality assumption in the sample selection model. The test is based on a flexible parametric specification of the density function of the error terms in the model. This specification follows a Hermite series with bivariate normality as a special case. All parameters of the model are estimated both under normality and under the more general flexible parametric specification, which enables testing for normality using a standard likelihood ratio test. If normality is rejected, then the flexible parametric specification provides consistent parameter estimates. The test has reasonable power, as is shown by a simulation study. The test also detects some types of ignored heteroscedasticity. Finally, we apply the flexible specification of the density to a travel demand model and test for normality in this model.

Suggested Citation

  • van der Klaauw, Bas & Koning, Ruud H, 2003. "Testing the Normality Assumption in the Sample Selection Model with an Application to Travel Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 31-42, January.
  • Handle: RePEc:bes:jnlbes:v:21:y:2003:i:1:p:31-42
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    Cited by:

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    6. David Greenaway & Richard Kneller & Xufei Zhang, 2012. "The effect of exchange rates on firm exports and the role of FDI," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 425-447, September.
    7. Masuhara, Hiroaki, 2013. "Semiparametric duration analysis with an endogenous binary variable: An application to hospital stays," CIS Discussion paper series 597, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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    11. Michael Pfaffermayr, 2014. "A GMM-Based Test for Normal Disturbances of the Heckman Sample Selection Model," Econometrics, MDPI, Open Access Journal, vol. 2(4), pages 1-18, October.
    12. Eun-Ju Lee & David Eastwood & Jinkook Lee, 2004. "A Sample Selection Model of Consumer Adoption of Computer Banking," Journal of Financial Services Research, Springer;Western Finance Association, vol. 26(3), pages 263-275, December.
    13. Hiroaki Masuhara, 2007. "Semi-nonparametric estimation of regression-based survival models," Economics Bulletin, AccessEcon, vol. 3(61), pages 1-12.
    14. Claudia PIGINI, 2012. "Of Butterflies and Caterpillars: Bivariate Normality in the Sample Selection Model," Working Papers 377, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    15. Kostov, Philip & Patton, Myles & Moss, Joan E. & McErlean, Seamus, 2005. "Does Gibrat's Law Hold Amongst Dairy Farmers in Northern Ireland?," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24775, European Association of Agricultural Economists.
    16. Spiess, Martin & Kroh, Martin, 2010. "A Selection Model for Panel Data: The Prospects of Green Party Support," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 172-188.
    17. Maarten Goos & Anna Salomons, 2017. "Measuring teaching quality in higher education: assessing selection bias in course evaluations," Research in Higher Education, Springer;Association for Institutional Research, vol. 58(4), pages 341-364, June.
    18. Mark Clatworthy & Gerald Makepeace & Michael Peel, 2009. "Selection bias and the Big Four premium: New evidence using Heckman and matching models," Accounting and Business Research, Taylor & Francis Journals, vol. 39(2), pages 139-166.
    19. Hiroaki Masuhara, 2008. "Semi-nonparametric count data estimation with an endogenous binary variable," Economics Bulletin, AccessEcon, vol. 3(42), pages 1-13.
    20. Lee Adkins & R. Carter Hill, 2007. "Bootstrap Inferences in Heteroscedastic Sample Selection Models: A Monte Carlo Investigation," Economics Working Paper Series 0710, Oklahoma State University, Department of Economics and Legal Studies in Business.
    21. van Hasselt, Martijn, 2011. "Bayesian inference in a sample selection model," Journal of Econometrics, Elsevier, vol. 165(2), pages 221-232.
    22. Riccardo Lucchetti & Claudia Pigini, 2013. "A test for bivariate normality with applications in microeconometric models," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 22(4), pages 535-572, November.
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