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Testing for Selectivity Bias in Panel Data Models

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  • Verbeek, Marno
  • Nijman, Theo

Abstract

The authors discuss several tests to check for the presence of selectivity bias in estimators based on panel data. One approach to test for selectivity bias is to specify the selection mechanism explicitly and estimate it jointly with the model of interest. Alternatively, one can derive the asymptotically efficient Lagrange multiplier test. Both approaches are computationally demanding. In this paper, the authors propose the use of simple variable addition and (quasi-) Hausman tests for selectivity bias that do not require any knowledge of the response process. They compare the power of these tests with the asymptotically efficient test using Monte Carlo methods. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Verbeek, Marno & Nijman, Theo, 1992. "Testing for Selectivity Bias in Panel Data Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 681-703, August.
  • Handle: RePEc:ier:iecrev:v:33:y:1992:i:3:p:681-703
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    1. Hausman, Jerry A & Wise, David A, 1979. "Attrition Bias in Experimental and Panel Data: The Gary Income Maintenance Experiment," Econometrica, Econometric Society, vol. 47(2), pages 455-473, March.
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    3. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    4. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    5. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    6. Holly, Alberto, 1982. "A Remark on Hausman's Specification Test," Econometrica, Econometric Society, vol. 50(3), pages 749-759, May.
    7. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
    8. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
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    10. Nijman, T.E. & Verbeek, M.J.C.M., 1989. "The nonresponse bias in the analysis of the determinants of total annual expenditures of households based on panel data," Discussion Paper 1989-36, Tilburg University, Center for Economic Research.
    11. Baltagi, Badi H., 1985. "Pooling cross-sections with unequal time-series lengths," Economics Letters, Elsevier, vol. 18(2-3), pages 133-136.
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