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From |
"Renzo Comolli" <renzo.comolli@yale.edu> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
Re: st: RE: testing endogeneity in a two-equation model with censored andbinary dependent variables |

Date |
Tue, 8 Jul 2003 21:26:28 -0400 |

I am not sure I understand your question. By Maddala (1983) I presume you mean the book "Limited-Dependent and Qualitative Variables in Econometrics". It is my understanding that in that book, exception made for the last chapter, there is a selection equation Y2*= a2X2 + e2 which does not depend in any way from Y1, and it linked to Y1 only by the fact that Cov(e1, e2) is different from 0, so the word "endogenous" in your email confuses me. It may well be that it is me to be confused. The crown jewel of all the book, except the last chapter, is probably the Heckman estimation method. In the last chapter the model is expanded to allow for the possibilty that the selection equation depends itself from the outcome variable. More specifically Y2* depends on the difference between the value Y1 actually takes and the value Y1 would have taken had the individual done the opposite choice (a value we don't observe). I would call this one endogenous, but (again) maybe it's me who doesn't have the terminology right. You can find much more on this second topic in Lee, Lung-Fei, 1979. "Identification and Estimation in Binary Choice Models with Limited (Censored) Dependent Variables," Econometrica, Vol. 47 (4) pp. 977-96 The papers that followed Regardless of what you mean by endogenous, the following survey might be worth reading Vella, Francis (1998) "Estimating Models with Sample Selection Bias: A Survey" Journal of Human Resources 33(1):127-169 Unfortunately, endogeneity in sample selection models did not receive enough attention in standard econometrics text books (Greene, Davidson and MacKinnon...). I think that for economists this is very unfortunate given that we usually think that payoff relevant consequences (the Y1 that happens and the Y1 that could have happened) are foundamental in the decision itself. I hope it helps. Renzo Comolli -----Original Message-----

**Follow-Ups**:**RE: st: RE: testing endogeneity in a two-equation model with censoredandbinary dependent variables***From:*Ricardo Henriquez <rhenriquez@sii.cl>

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