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Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure

Author

Listed:
  • Akay, Alpaslan

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Tsakas, Elias

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In this paper we discuss the differences between the average marginal effect and the marginal effect of the average individual in sample selection models, estimated by Heckman's two step procedure. We show that the bias that emerges as a consequence of interchanging them, could be very significant, even in the limit. We suggest a computationally cheap approximation method, which corrects the bias in a large extent. We illustrate the implications of our method with an empirical application of earnings assimilation and a small Monte Carlo simulation.

Suggested Citation

  • Akay, Alpaslan & Tsakas, Elias, 2006. "Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure," Working Papers in Economics 239, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0239
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    File URL: http://hdl.handle.net/2077/2667
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    References listed on IDEAS

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    1. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
    2. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-489, October.
    3. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
    4. Atanu Saha & Oral Capps & Patrick Byrne, 1997. "Calculating marginal effects in models for zero expenditures in household budgets using a Heckman-type correction," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1311-1316.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    6. Pål Longva & Oddbjørn Raaum, 2003. "Earnings assimilation of immigrants in Norway – A reappraisal," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 177-193, February.
    7. Atanu Saha & Oral Capps & Patrick Byrne, 1997. "Calculating marginal effects in dichotomous - continuous models," Applied Economics Letters, Taylor & Francis Journals, vol. 4(3), pages 181-185.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Heckman's two step estimator; average marginal effect; marginal effect of the average individual; earnings assimilation;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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