RE: st: Instrument Validity tests for Heckman 1979

["Kyrizi, Andri" <ak196@leicester.ac.uk>]

Dear Professor Schaffer,

Thank you so much for your reply and your examples. 
Everything is so much clearer now.

I have one last question:

After the select option shouldn't I specify the variable that I want to control for the selectivity bias (i.e a dummy variable indicating Unemployed and Employed individuals)?
heckman lnEarnings  Schooling Experience Exp2  Male married, select ( Unemp= Male married children ) 

All the best
Andri
________________________________________
From: owner-statalist@hsphsun2.harvard.edu [owner-statalist@hsphsun2.harvard.edu] on behalf of Schaffer, Mark E [M.E.Schaffer@hw.ac.uk]
Sent: 11 March 2014 15:16
To: statalist@hsphsun2.harvard.edu
Subject: RE: st: Instrument Validity tests for Heckman 1979

Andri,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of Kyrizi, Andri
> Sent: 11 March 2014 14:22
> To: statalist@hsphsun2.harvard.edu
> Subject: RE: st: Instrument Validity tests for Heckman 1979
>
> Dear all,
>
> In regards to yesterday's question and answer,
>
> Does anyone know if I could use a two step heckman approach instead of the
> treatreg approach?
> And test it using the -ltrest-?

You can't use -lrtest- after the Heckman 2-step estimator because -heckman- with the twostep option doesn't save a log likelihood.

But there's probably no particular reason to use the two-step estimator anyway when the ML estimator is available.

So estimate your model using -heckman- with the default ML estimator, and then do an overid test by comparing it to a just-identified version, where just-identification comes from the functional form.  And if you want to test the validity of some of the exclusion restrictions, do an LR test with/without them.

Here are three examples using Stata's sample womenwk dataset.  The first compares the overidentified version with 2 exclusion restrictions (and the functional form restriction) to one which is just-identified via functional form.  The second and third compare the overidentified version with 2 exclusion restrictions to versions with just one exclusion restriction.  The output of the estimations is suppressed just to make things a bit more readable.  The "m" and "c" at the end of the names of the saved estimation results refer to "married" and "children".

HTH,
Mark

. webuse womenwk

.
. qui heckman wage educ age, select(married children educ age)

. est store overidmc

. qui heckman wage educ age, select(educ age)

. est store justid

.
. lrtest overid justid

Likelihood-ratio test                                 LR chi2(2)  =    358.82
(Assumption: justid nested in overid)                 Prob > chi2 =    0.0000

.
. qui heckman wage educ age, select(married educ age)

. est store overidm

.
. lrtest overidmc overidm

Likelihood-ratio test                                 LR chi2(1)  =    350.01
(Assumption: overidm nested in overidmc)              Prob > chi2 =    0.0000

.
. qui heckman wage educ age, select(children educ age)

. est store overidc

.
. lrtest overidmc overidc

Likelihood-ratio test                                 LR chi2(1)  =     43.43
(Assumption: overidc nested in overidmc)              Prob > chi2 =    0.0000


>
> Would that still be correct?
>
> All the best,
> Andri
>
> ________________________________________
> From: owner-statalist@hsphsun2.harvard.edu [owner-
> statalist@hsphsun2.harvard.edu] on behalf of Kyrizi, Andri
> [ak196@leicester.ac.uk]
> Sent: 10 March 2014 18:09
> To: statalist@hsphsun2.harvard.edu
> Subject: RE: st: Instrument Validity tests for Heckman 1979
>
> Hello Prof Antonakis,
>
> Thank you so much for your reply and help!
>
> All the best,
> Andri
> ________________________________________
> From: owner-statalist@hsphsun2.harvard.edu [owner-
> statalist@hsphsun2.harvard.edu] on behalf of John Antonakis
> [John.Antonakis@unil.ch]
> Sent: 10 March 2014 17:35
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: Instrument Validity tests for Heckman 1979
>
> Hi:
>
> See the following (if you are talking about an overidentification test):
>
> http://www.stata.com/statalist/archive/2010-10/msg00915.html
>
> A -heckman- and -treatreg- (now -etregress-) basically do the same thing,
> the difference being that the former has a truncated sample on y.
>
> So, it seems to me you can use the -ltrest- as explained by Mark Schaffer.
>
> Best,
> J.
>
> __________________________________________
>
> John Antonakis
> Professor of Organizational Behavior
> Director, Ph.D. Program in Management
>
> Faculty of Business and Economics
> University of Lausanne
> Internef #618
> CH-1015 Lausanne-Dorigny
> Switzerland
> Tel ++41 (0)21 692-3438
> Fax ++41 (0)21 692-3305
> http://www.hec.unil.ch/people/jantonakis
>
> Associate Editor:
> The Leadership Quarterly
> Organizational Research Methods
> __________________________________________
>
> On 10.03.2014 18:06, Kyrizi, Andri wrote:
> > Dear Statalisters,
> >
> > I would like to test the validity of my instruments after using the Heckman's
> (1979) two-step sample selection model. In particular I want to correct for
> the selectivity bias for using only employed individuals.
> >
> > I've searched everywhere to find a way to test them but could't find
> anything. I am aware that a topic on 'diagnostics for the treatreg procedure'
> exists but I don't think it relates to my question.
> >
> > I would really appreciate any guidance you could give me!
> >
> > Many thanks,
> > Andri
> >
> >
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