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Selection Correction in Panel Data Models: An Application to Labour Supply and Wages

Author

Listed:
  • Dustmann, Christian

    (University College London)

  • Rochina-Barrachina, María Engracia

    (Universidad de Valencia)

Abstract
In recent years a number of panel estimators have been suggested for sample selection models, where both the selection equation and the equation of interest contain individual effects which are correlated with the explanatory variables. We review and compare some of these estimators, and apply them to estimating the return to actual labour market experience for females, using a panel of twelve years. All these estimators rely on the assumption of strict exogeneity of regressors in the equation of interest, conditional on individual specific effects and the selection mechanism. This assumption is likely to be violated in many applications. Also, life history variables are often measured with error in survey data sets, because they contain a retrospective component. We show how non-strict exogeneity and measurement error can be taken into account within the estimation methods discussed.

Suggested Citation

  • Dustmann, Christian & Rochina-Barrachina, María Engracia, 2000. "Selection Correction in Panel Data Models: An Application to Labour Supply and Wages," IZA Discussion Papers 162, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp162
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    estimation of wage equations; female labour supply; Panel data sample selection estimators;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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