Spatial differencing for sample selection models with ‘site-specific’ unobserved local effects

Alexander Klein and Guy Tchuente

The Econometrics Journal, 2024, vol. 27, issue 2, 235-257

Abstract: SummaryThis paper proposes an estimator which combines spatial differencing with a two-step sample selection estimator. We derive identification, estimation, and inference results from ‘site-specific’ unobserved effects. These effects operate at a spatial scale that cannot be captured by administrative borders. Therefore, we use spatial differencing. We show that under justifiable assumptions, the estimator is consistent and asymptotically normal. A Monte Carlo experiment illustrates the small sample properties of our estimator. We apply our procedure to the estimation of a female wage offer equation in the United States and the results show the relevance of spatial differencing to account for ‘site-specific’ unobserved effects.

Keywords: Sample selection; site-specific unobserved heterogeneity; spatial difference (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:oup:emjrnl:v:27:y:2024:i:2:p:235-257.

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