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st: Re: Heckman Method


From   Trevor Dave <trevor2005d@yahoo.ca>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: Heckman Method
Date   Fri, 11 Nov 2005 13:18:36 -0500 (EST)

I agree with Robert's points. The dummy ' Urban/rural'
area may act as exclusion restriction if we think that
in urban area prospects for jobs is better and
consequently labor fore participation is higher.
However, again the problem is that if 'urban/rural'
influences wage rate then ultimately there will be
impact on work hours.

Trevor 

Following up on the points rightly mentioned by
 Rafa,
 
 The traditional exclusion restrictions in the
 literature  (the number
 of children in the household, the presence of an
 active head  of the
 household and the expected variance of household
 income) are
 unconvincing if you consider for instance that all
 these factors
 impact the hours decision specially for women, and
if you beleive in
 the possiblity of division of labor in the household
 between husbands
 and wifes.
 
 Unfortunately, other selectivity correction methods
 won't get you out
 of this dilemma... actually as far as I remember the
 Heckman method is
 the only one that allows you to have the same
 variables in both
 equations, precisely because of the nonlinearities
 implied by the
 Normality assumption. Any semiparametric correction
 method will
 require exclusion restrictions. Finally, the
 identification based on
 the nonlinearity of the IMR is very weak, as it has
 been shown that
 for a good range of values of the XB index the IMR
 is virtually
 linear, so if you don't have a good spread of values
 in the index,
 your identification might fail.
 
 Robert
 
 On 11/10/05, R.E. De Hoyos <redeho@hotmail.com>
 wrote:
 > 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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