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Two-Step Estimation of Panel Data Models with Censored Endogenous Variables and Selection
| Citations: | 57 - 3 self |
BibTeX
@MISC{Vella_two-stepestimation,
author = {Bias Francis Vella and Marno Verbeek and K. U. Leuven and Jel-codes C},
title = {Two-Step Estimation of Panel Data Models with Censored Endogenous Variables and Selection},
year = {}
}
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Abstract
This paper presents some two-step estimators for a wide range of parametric panel data models with censored endogenous variables and sample selection bias. Our approach is to derive estimates of the unobserved heterogeneity responsible for the endogeneity/selection bias to include as additional explanatory variables in the primary equation. These are obtained through a decomposition of the reduced form residuals. The panel nature of the data allows adjustment, and testing, for two forms of endogeneity and/or sample selection bias. Furthermore, it incorporates roles for dynamics and state dependence in the reduced form. Finally, we provide an empirical illustration which features our procedure and highlights the ability to test several of the underlying assumptions.
Keyphrases
censored endogenous variable two-step estimation panel data model sample selection bias empirical illustration endogeneity selection bias panel nature unobserved heterogeneity reduced form residual additional explanatory variable two-step estimator underlying assumption reduced form state dependence wide range primary equation parametric panel data model
