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A Bayesian Model of Sample Selection with a Discrete Outcome Variable

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  • Maksym, Obrizan

Abstract

Relatively few published studies apply Heckman’s (1979) sample selection model to the case of a discrete endogenous variable and those are limited to a single outcome equation. However, there are potentially many applications for this model in health, labor and financial economics. To fill in this theoretical gap, I extend the Bayesian multivariate probit setup of Chib and Greenberg (1998) into a model of non-ignorable selection that can handle multiple selection and discrete-continuous outcome equations. The first extension of the multivariate probit model in Chib and Greenberg (1998) allows some of the outcomes to be missing. In addition, I use Cholesky factorization of the variance matrix to avoid the Metropolis-Hastings algorithm in the Gibbs sampler. Finally, using artificial data I show that the model is capable of retrieving the parameters used in the data-generating process and also that the resulting Markov Chain passes all standard convergence tests.

Suggested Citation

  • Maksym, Obrizan, 2010. "A Bayesian Model of Sample Selection with a Discrete Outcome Variable," MPRA Paper 28577, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28577
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    File URL: https://mpra.ub.uni-muenchen.de/28577/1/MPRA_paper_28577.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Markov Chain Monte Carlo; sample selection; multivariate probit;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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