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st: Re: Heckman Method


From   "R.E. De Hoyos" <redeho@hotmail.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Re: Heckman Method
Date   Thu, 10 Nov 2005 10:42:28 -0000

Wasim/John,

Two points here. (1) You have to think if observed hours of work are really the outcome of a utility maximizing process or if they are primarily driven by institutional rigidity. If institutional rigidities matter then almost all instruments will capture the effect upon participation (a utility-maximizing decision) without affecting hours of work (see Heckman 1990, AER). In many cases the density of hours worked is concentrated around two points, i.e. full time (40 hrs per week) and part time (20 hrs per week). The relative importance of the self-employed (and/or informal sectors in less developed countries) will make this distribution less concentrated around these two points. So you really need to think about the decision process behind the data. Depending on your data, it could be preferable to estimate a discrete choice model (multinomial logit or probit) to approximate participation and---indirectly---hours worked. (2) Some of the most common instruments in the literature of female labour participation are: the number of children in the household, the presence of an active head of the household (typically the husband or father) and the expected variance of household income (specially under borrowing constraints).

I hope this helps,

Rafa
________________________
R.E. De Hoyos
Faculty of Economics
University of Cambridge
CB3 9DE, UK
www.econ.cam.ac.uk/phd/red29/

----- Original Message ----- From: "Wasim Akram" <wasim704@yahoo.ca>
To: <statalist@hsphsun2.harvard.edu>
Sent: Thursday, November 10, 2005 5:18 AM
Subject: st: Heckman Method



Dear Statalist Members,
I am trying to estimate labor force participation and
work hour model using heckman's two step estimator. I
do not have wage data and consequently I am relying on
reduced from approach.
So far I have not used any exclusion restriction in
the first stage probit probit model and consequently
the entire identification strategy is based on the
normality assumption of the error terms. Many
economists argue to avoid such situation.
So I need a variable that effect labor force
participation but not work hours. I find it difficult
to identify such variable given the fact that labor
force participation and work hours are derived from
the same utility maximizing model.
Can any one suggest me of any such variable? Or should
I drop Heckman method and look for other method for
correcting selection bias? Which method?

Thanks,

Wasim






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