st: Re: Heckman Method

["R.E. De Hoyos" <redeho@hotmail.com>]

Wasim/John,

Two points here. (1) You have to think if observed hours of work are really 
the outcome of a utility maximizing process or if they are primarily driven 
by institutional rigidity. If institutional rigidities matter then almost 
all instruments will capture the effect upon participation (a 
utility-maximizing decision) without affecting hours of work (see Heckman 
1990, AER). In many cases the density of hours worked is concentrated around 
two points, i.e. full time (40 hrs per week) and part time (20 hrs per 
week). The relative importance of the self-employed (and/or informal sectors 
in less developed countries) will make this distribution less concentrated 
around these two points. So you really need to think about the decision 
process behind the data. Depending on your data, it could be preferable to 
estimate a discrete choice model (multinomial logit or probit) to 
approximate participation and---indirectly---hours worked. (2) Some of the 
most common instruments in the literature of female labour participation 
are: the number of children in the household, the presence of an active head 
of the household (typically the husband or father) and the expected variance 
of household income (specially under borrowing constraints).

I hope this helps,

Rafa
________________________
R.E. De Hoyos
Faculty of Economics
University of Cambridge
CB3 9DE, UK
www.econ.cam.ac.uk/phd/red29/

----- Original Message ----- 
From: "Wasim Akram" <wasim704@yahoo.ca>
To: <statalist@hsphsun2.harvard.edu>
Sent: Thursday, November 10, 2005 5:18 AM
Subject: st: Heckman Method



> Dear Statalist Members,
> I am trying to estimate labor force participation and
> work hour model using heckman's two step estimator. I
> do not have wage data and consequently I am relying on
> reduced from approach.
> So far I have not used any exclusion restriction in
> the first stage probit probit model and consequently
> the entire identification strategy is based on the
> normality assumption of the error terms. Many
> economists argue to avoid such situation.
> So I need a variable that effect labor force
> participation but not work hours. I find it difficult
> to identify such variable given the fact that labor
> force participation and work hours are derived from
> the same utility maximizing model.
> Can any one suggest me of any such variable? Or should
> I drop Heckman method and look for other method for
> correcting selection bias? Which method?
>
> Thanks,
>
> Wasim
>
>
>
>
>
>
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