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st: Stata/Heckman/Endogeneity


From   "Fraser, Steven" <[email protected]>
To   "Statalist (E-mail)" <[email protected]>
Subject   st: Stata/Heckman/Endogeneity
Date   Wed, 29 Jan 2003 12:48:57 -0500

Listers

Is there a good reference for how Stata implements the heckman model for the
common example of wages for union vs. nonunion members?

I have tried to review the (R)heckman and each example seems to demonstrate
the censored or truncated distribution aspect (that of a female's
reservation wage and there are only wage observations for those that work).
There is also a good FAQ on endogeneity and self-selection but I think
heckman should still work.

I have tried the following:
Assume the following model:

Eq. (1)  y1 = y2 + x1 + x2 + u

y1 is a continuous variable
y2 is a dummy variable (i.e. union)

There is a question that y1 & y2 are endogenous.  y1 may cause y2 and y2 may
cause y1.
Accounting for this, the system is now

Eq. (1)  y1 = y2 + x1 + x2 + u
Eq. (2)  y2 = y1 + v

It was suggested that I use a heckman 2-step to see if y2 is endogenous by
interpreting y2 as a "choice" variable instead of as a selection bias. (I
interpret the selection bias question to be where the number of observations
on y1--the dependent in equation (1)-- are fewer than those for all the
exogenous x's.

When I try to run:
heckman y1 x1 x2 (y2 x3 x4) twostep
I get the error:

Dependent variable never censored due to selection: 
model would simplify to OLS regression

This I guess makes sense because I am not 'selecting' anything, that is, I
have observations for all variables.
Is this an inappropriate application of Stata's heckman commands?

Or should I run equation(2) independently, gather the predicted values and
use in place of the dummy y2 in equation (1) or try treatreg as the FAQ
suggests?

Thanks for help - SF

Steve Fraser
Univ of South Florida
(813) 974-9680

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