Maximum Likelihood Estimation of the Panel Sample Selection Model
Hung-pin Lai () and
Wen-Jen Tsay ()
No 12-A006, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan
Heckman’s (1976, 1979) sample selection model has been employed in many studies of linear or nonlinear regression applications. It is well known that ignoring the sample selectivity problem may result in inconsistency of the estimator due to the correlation between the statistical errors in the selection and main equations. In this paper, we consider the problem of estimating a panel sample selection model. Since the panel data model contains the individual effects, such as the fixed or random effect, the likelihood function is quite complicated when the sample selection is taken into account. We therefore propose to solve the estimation problem by utilizing the maximum likelihood (ML) approach together with the closed skewed normal distribution. Finally, we also conduct a Monte Carlo experiment to investigate the finite sample performance of the proposed estimator and find that our ML estimator provides reliable and quite satisfactory results.
Keywords: Panel data; Sample selection; Maximum likelihood estimation; Closed skewed normal (search for similar items in EconPapers)
JEL-codes: C33 C40 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-08, Revised 2012-10
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:sin:wpaper:12-a006
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