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st: Heckman panel with individual effects possible?

From   hwiig <>
Subject   st: Heckman panel with individual effects possible?
Date   Tue, 19 Oct 2004 17:26:05 +0200

In case my question did not go through in the first attemp, I hereby try again:


I got a panel data set of some small scale farmers in developing countries. Some sell volume X at individual price P, some don't sell at all. The control variables vector Z for all farmers available.

Heckmans method controls for self selection by (i) estimating a probit for sell / no sell (ii) introducing the resulting Mills ratio in the sales equation before running a normal OLS (on the households that do sell their product).

I got information from two years, so I wonder whether there exist some kind of Stata procedure to correct by estimating individual effects (either fixed or random).

The Stata command "xtprobit" does exactly this for a isolated first step, so

(1) How do I introduce xtprobit in the first stage of the Heckman in order to correct for individual (unobserved) differences in choosing to sell or not?

(2) How do I introduce individual differences the sales function (second step) of the Heckman model (i.e. also individual unobserved differences in sales volume for the farmers who do sell)?

Anyone out there who knows how to solve this? I would most appreciate your help!

Henrik Wiig
Department of Economics
University of Oslo
PO Box 1095 Blindern, N-0317 Oslo, Norway
Eilert Sundts hus, 12th floor, Moltke Moes vei 31
Telephone: 22 85 51 35
Fax: 22 85 50 35
Private telephone: 22 55 24 84
Mobile telephone: 47 75 75 09

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