Selection Correction in Panel Data Models: An Application to Labour Supply and Wages

58 Pages Posted: 17 Nov 2000

See all articles by Christian Dustmann

Christian Dustmann

University College London; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

M. E. Rochina

University of Valencia - Department of Economic Analysis; University College London

Date Written: June 2000

Abstract

In recent years a number of panel estimators have been suggested for sample selection models, where both the selection equation and the equation of interest contain individual effects which are correlated with the explanatory variables. We review and compare some of these estimators, and apply them to estimating the return to actual labour market experience for females, using a panel of twelve years. All these estimators rely on the assumption of strict exogeneity of regressors in the equation of interest, conditional on individual specific effects and the selection mechanism. This assumption is likely to be violated in many applications. Also, life history variables are often measured with error in survey data sets, because they contain a retrospective component. We show how non-strict exogeneity and measurement error can be taken into account within the estimation methods discussed.

Keywords: Panel data sample selection estimators, female labour supply, estimation of wage equations

JEL Classification: C33, C34, J3

Suggested Citation

Dustmann, Christian and Rochina-Barrachina, María Engracia, Selection Correction in Panel Data Models: An Application to Labour Supply and Wages (June 2000). Available at SSRN: https://ssrn.com/abstract=250100 or http://dx.doi.org/10.2139/ssrn.250100

Christian Dustmann (Contact Author)

University College London ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5832 (Phone)
+44 20 7916 2775 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

María Engracia Rochina-Barrachina

University of Valencia - Department of Economic Analysis ( email )

Campus de los Naranjos
46022 Valencia
Spain

University College London

Gower Street
London
United Kingdom

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