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Collinearity and Two-Step Estimation of Sample Selection Models: Problems, Origins, and Remedies

Siu Leung () and Shih-Ti Yu

Computational Economics, 2000, vol. 15, issue 3, 173-199

Abstract: This paper investigates the origins of the collinearity problems encountered in the two-step estimation method for sample selection models. The analysis reveals several critical misconceptions and deficiencies in the literature. Remedies to the collinearity problems are proposed and evaluated. Monte Carlo experiments as well as an empirical example based on Mroz‘s (1987) data are used to illustrate the practical relevance and importance of the analysis.

Keywords: sample selection; Heckman's two-step method; collinearity problem; remedy; Monte Carlo experiment; wage equation (search for similar items in EconPapers)
Date: 2000
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Working Paper: Collinearity and Two-Step Estimation of Sample Selection Models: Problems, Origins and Remedies (1996)
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