IDEAS home Printed from https://ideas.repec.org/p/iek/wpaper/1707.html
   My bibliography  Save this paper

Efficient Estimation of Linear Panel Data Models with Sample Selection and Fixed Effects

Author

Listed:
  • Chirok Han

    () (Department of Economics, Korea University, Seoul, Republic of Korea)

  • Goeun Lee

    () (Department of Economics, Korea University, Seoul, Republic of Korea)

Abstract

For linear panel data models with endogenous selectivity, the popular pooled ordinary least squares with bias correction and its minimum distance variant can suffer from severe efficiency loss in the presence of large random effects. To resolve this problem, we algebraically derive an efficient estimator based on the moment restrictions used by the pooled ordinary least squares and make the estimator feasible under the conventional error-component assumption. The efficient estimation involves heavy computation, and we propose a convenient suboptimal estimator based on a novel common weighting transformation. We also consider partial and full aggregation of information in pairwise differences, where unobserved fixed effects are completely eliminated. Efficient estimation based on pairwise differences is discussed, and a computationally affordable method of estimating nuisance higher-order moments is proposed. Analytic standard errors are provided for all considered estimators. Simulations suggest that a convenient suboptimal estimator and the fully-aggregated pairwise-differencing estimator exhibit remarkable performances. The methods are applied to estimating earnings equation for married women using the Korean Labor and Income Panel Study data.

Suggested Citation

  • Chirok Han & Goeun Lee, 2017. "Efficient Estimation of Linear Panel Data Models with Sample Selection and Fixed Effects," Discussion Paper Series 1707, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:1707
    as

    Download full text from publisher

    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1707.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Machado, Cecilia, 2012. "Selection, Heterogeneity and the Gender Wage Gap," IZA Discussion Papers 7005, Institute for the Study of Labor (IZA).
    2. Xuan Chen & Carlos A. Flores, 2015. "Bounds on Treatment Effects in the Presence of Sample Selection and Noncompliance: The Wage Effects of Job Corps," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(4), pages 523-540, October.
    3. Rupert, Peter & Zanella, Giulio, 2015. "Revisiting wage, earnings, and hours profiles," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 114-130.
    4. 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.
    5. Angela Vossmeyer, 2016. "Sample Selection and Treatment Effect Estimation of Lender of Last Resort Policies," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 34(2), pages 197-212, April.
    6. Malikov, Emir & Kumbhakar, Subal C. & Sun, Yiguo, 2016. "Varying coefficient panel data model in the presence of endogenous selectivity and fixed effects," Journal of Econometrics, Elsevier, vol. 190(2), pages 233-251.
    7. Gabriel Jiménez & Steven Ongena & José‐Luis Peydró & Jesús Saurina, 2014. "Hazardous Times for Monetary Policy: What Do Twenty‐Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk‐Taking?," Econometrica, Econometric Society, vol. 82(2), pages 463-505, March.
    8. Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2016. "Does short-time work save jobs? A business cycle analysis," European Economic Review, Elsevier, vol. 84(C), pages 99-122.
    9. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    11. Federico Revelli, 2013. "Tax Mix Corners and Other Kinks," Journal of Law and Economics, University of Chicago Press, vol. 56(3), pages 741-776.
    12. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    13. Sasaki, Yuya, 2015. "Heterogeneity and selection in dynamic panel data," Journal of Econometrics, Elsevier, vol. 188(1), pages 236-249.
    14. Jochmans, Koen, 2015. "Multiplicative-error models with sample selection," Journal of Econometrics, Elsevier, vol. 184(2), pages 315-327.
    15. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
    16. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
    17. Han, Chirok & Kim, Beomsoo, 2011. "A GMM interpretation of the paradox in the inverse probability weighting estimation of the average treatment effect on the treated," Economics Letters, Elsevier, vol. 110(2), pages 163-165, February.
    18. Christian Dustmann & María Engracia Rochina-Barrachina, 2007. "Selection correction in panel data models: An application to the estimation of females' wage equations," Econometrics Journal, Royal Economic Society, vol. 10(2), pages 263-293, July.
    19. Semykina, Anastasia & Wooldridge, Jeffrey M., 2010. "Estimating panel data models in the presence of endogeneity and selection," Journal of Econometrics, Elsevier, vol. 157(2), pages 375-380, August.
    20. María Engracia Rochina-Barrachina, 1999. "A New Estimator for Panel Data Sample Selection Models," Annals of Economics and Statistics, GENES, issue 55-56, pages 153-181.
    21. Maria Alva & Alastair Gray & Borislava Mihaylova & Philip Clarke, 2014. "The Effect Of Diabetes Complications On Health‐Related Quality Of Life: The Importance Of Longitudinal Data To Address Patient Heterogeneity," Health Economics, John Wiley & Sons, Ltd., vol. 23(4), pages 487-500, April.
    22. repec:adr:anecst:y:1999:i:55-56:p:06 is not listed on IDEAS
    23. Giulio Zanella & Peter Rupert, 2010. "Revisiting Wage, Earnings, and Hours Profiles," 2010 Meeting Papers 1158, Society for Economic Dynamics.
    24. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    25. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
    26. repec:adr:anecst:y:1999:i:55-56 is not listed on IDEAS
    27. Chamberlain, Gary, 1992. "Efficiency Bounds for Semiparametric Regression," Econometrica, Econometric Society, vol. 60(3), pages 567-596, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fixed effects; selection bias correction; efficiency; correlated random effects; pairwise differencing;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iek:wpaper:1707. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kim, Jisoo). General contact details of provider: http://edirc.repec.org/data/ierkukr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.