Re: st: selection equation Heckman

[urbain thierry YOGO <yogout@gmail.com>]

In the earlier version of the Wooldridge book you quoted(page 573,
Wooldridge, 2002), Wooldridge said that if variables in the outcome
equation are not strict subset of the ones in selected equation, the
inverse Mills ratio can be approximated well by a linear function of
variables (in the outcome equation). This could lead to a severe
collinearity among regressors and large standards errors. In the same
vein, if you add extra variable not included in the selection
equation, remember that these variables are not used to build the
inverse Mills ratio. Then if these variables could explain the
selection variable, that means you face an omitted variable bias in
the selection equation and consequently the selection bias could not
be corrected in appropriate way. Finally, doing so do you introduce a
kind of endogenous bias ? i am not sure. However Verbeek and
Wooldridge are both right.

2012/10/15, Jan Wynen <Jan.Wynen@kuleuven.be>:
> Dear all,
>
> I am currently trying to estimate a Heckman model, whereby I have a
> selection equation which includes socio- demographic variables and a unique
> selection variable. The outcome equation also includes these socio-
> demographic variables (minus the selection variable) but also includes extra
> variables which are only visible if the selection equation equals one.
> According to Wooldridge (Econometric Analysis of Cross Section and Panel
> Data, 2nd ed. Cambridge: MIT Press.2010, Chapter 19, pp.803-806) the
> variables in the outcome equation should be a strict- subset of the ones in
> the selection equation. However, according to Verbeek (A guide to modern
> econometrics,  1st ed. Wiley.2000, Chapter 7, pp. 243) the inclusion of
> extra variables in the outcome equation is no problem, if they have a zero
> coefficient in the selection equation.
>
> Is estimating a model as indicated above impossible using the Heckman
> procedure (will it lead to a problem with endogeneity)? Or is the inclusion
> of extra variables (not appearing in the selection equation) in the outcome
> equation OK, and if so does anybody have more references to literature
> saying this practice is OK? I have found an earlier post on this, however
> the references were wrong.
>
> I have already posted this question two weeks ago, my apologies if this is
> regarded as being impatient.
>
> Best and many thanks,
>
> Jan
>
>
>
>
>
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-- 
*Urbain Thierry YOGO
Ph.D candidate in Economics*
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