Consistent estimation in pseudo panels in the presence of selection bias

Jhon Mora Rodriguez () and Juan Muro ()

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2014, vol. 8, No 2014-43, 25 pages

Abstract: In the presence of selection bias the traditional estimators for pseudo panel data models are inconsistent. This paper discusses a method to achieve consistency in static linear pseudo panels in the presence of selection bias and a testing procedure for sample selection bias. The authors' approach uses a bias correction term proportional to the inverse Mills ratio with argument equal to the "normit" of a consistent estimation of the conditional probability of being observed given cohort membership. Monte Carlo analysis shows the test does not reject the null for fixed T at a 5% significance level in finite samples. As a "side effect" the authors utilize the enlarged pseudo panel to provide a GMM consistent estimation of the pseudo panel parameters under rejection of the null and apply the procedure to estimate the rate of return to education in Colombia.

Keywords: Repeated cross-section models; selectivity bias testing; returns to education (search for similar items in EconPapers)
JEL-codes: C15 C23 C52 I26 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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http://dx.doi.org/10.5018/economics-ejournal.ja.2014-43
https://www.econstor.eu/bitstream/10419/104991/1/812631765.pdf (application/pdf)

Related works:
Working Paper: Consistent estimation of pseudo panels in the presence of selection bias (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201443

DOI: 10.5018/economics-ejournal.ja.2014-43

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