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Estimation and interpretation of a Heckman selection model with endogenous covariates

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  • Jörg Schwiebert

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Abstract

In this paper, we develop a Heckman selection model with endogenous covariates. Estimation of this model is easy and can be done within any econometrics software which supports maximum likelihood estimation of the Heckman selection model. The most important benefit of our model is that it provides an easy-to-interpret measure of the composition of the fully observed sample with respect to unobservables. As an example, we apply our model to the study of the composition of the female full time full year workforce, as has been done by Mulligan and Rubinstein (Q J Econ 123:1061–1110, 2008 ). We find that their conclusion that the female workforce was negatively selected in the late 1970s is robust to accounting for the potential endogeneity of education in a Heckman selection model. However, we find that accounting for endogeneity leads to a huge increase in the estimated returns to education. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Jörg Schwiebert, 2015. "Estimation and interpretation of a Heckman selection model with endogenous covariates," Empirical Economics, Springer, vol. 49(2), pages 675-703, September.
  • Handle: RePEc:spr:empeco:v:49:y:2015:i:2:p:675-703
    DOI: 10.1007/s00181-014-0881-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Sample selection model; Endogenous covariates; Gender wage gap; Composition of the female workforce; Female labor force participation; C21; C24; C26; J21; J31;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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