Individual wage and reservation wage: efficient estimation of a simultaneous equation model with endogenous limited dependent variables
We consider a simultaneous equation model with two endogenous limited dependent variables (individual wage and reservation wage) characterized by a selection mechanism determining a two-regimes endogenous-switching. We extend the FIML procedure proposed by Poirier-Ruud (1981) for a single equation switching model providing a stochastic specification for both equations and for the selection criterion. An accurate Monte Carlo experiment shows that the relative efficiency of the FIML estimator over to the Two-Stage procedure is remarkably high in presence of a high degree of endogeneity in the selection equation.
|Date of creation:||23 Sep 2009|
|Date of revision:|
|Publication status:||Published in Proceedings of Scientific Meeting of the Italian Statistical Society: Statistical Methods for the Analysis of Large Data-Sets Pescara: University G. D'Annunzio (2009): pp. 343-346|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Heckman, J J & Tobias, Justin & Vytlacil, Ed, 2003.
"Simple Estimators for Treatment Parameters in a Latent Variable Framework,"
Staff General Research Papers Archive
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- James Heckman & Justin L. Tobias & Edward Vytlacil, 2003. "Simple Estimators for Treatment Parameters in a Latent-Variable Framework," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 748-755, August.
- Heckman, James J, 1978.
"Dummy Endogenous Variables in a Simultaneous Equation System,"
Econometric Society, vol. 46(4), pages 931-59, July.
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