On Testing Sample Selection Bias Under the Multicollinearity Problem
This paper reviews and extends the literature on the finite sample behavior of tests for sample selection bias. Monte Carlo results show that, when the “multicollinearity problem” identified by Nawata (1993) is severe, (i) the t-test based on the Heckman-Greene variance estimator can be unreliable, (ii) the Likelihood Ratio test remains powerful, and (iii) nonnormality can be interpreted as severe sample selection bias by Maximum Likelihood methods, leading to negative Wald statistics. We also confirm previous findings (Leung and Yu, 1996) that the standard regression-based t-test (Heckman, 1979) and the asymptotically efficient Lagrange Multiplier test (Melino, 1982), are robust to nonnormality but have very little power.
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Volume (Year): 24 (2005)
Issue (Month): 4 ()
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- Angelo Melino, 1982. "Testing for Sample Selection Bias," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 151-153.
- Nawata, Kazumitsu, 1995. "Estimation of sample-selection models by the maximum likelihood method," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 39(3), pages 299-303.
- Olsen, Randall J, 1980. "A Least Squares Correction for Selectivity Bias," Econometrica, Econometric Society, vol. 48(7), pages 1815-1820, November.
- Leung, Siu Fai & Yu, Shihti, 1996.
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- Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-161, January.
- Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-799, July.
- Thomas Mroz, "undated". "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," University of Chicago - Population Research Center 84-8, Chicago - Population Research Center.
- Nawata, Kazumitsu, 1994. "Estimation of sample selection bias models by the maximum likelihood estimator and Heckman's two-step estimator," Economics Letters, Elsevier, vol. 45(1), pages 33-40, May.
- Olsen, Randall J, 1982. "Distributional Tests for Selectivity Bias and a More Robust Likelihood Estimator," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 223-240, February.
- Greene, William H, 1981. "Sample Selection Bias as a Specification Error: Comment," Econometrica, Econometric Society, vol. 49(3), pages 795-798, May.
- Nawata, Kazumitsu, 1993. "A note on the estimation of models with sample-selection biases," Economics Letters, Elsevier, vol. 42(1), pages 15-24. Full references (including those not matched with items on IDEAS)
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