IT Outsourcing and Firm Productivity: Eliminating Bias from Selective Missingness in the Dependent Variable

28 Pages Posted: 11 Jan 2017

See all articles by Christoph Breunig

Christoph Breunig

Humboldt University of Berlin

Michael E. Kummer

University of East Anglia (UEA)

Jörg Ohnemus

Centre for European Economic Research (ZEW)

Steffen Viete

German Council of Economic Experts

Date Written: December 15, 2016

Abstract

Missing values are a major problem in all econometric applications based on survey data. A standard approach assumes data are missing-at-random and uses imputation methods, or even listwise deletion. This approach is justified if item non-response does not depend on the potentially missing variables’ realization. However, assuming missing-at-random may introduce bias if non-response is, in fact, selective. Relevant applications range from financial or strategic firm-level data to individual-level data on income or privacy-sensitive behaviors.

In this paper, we propose a novel approach to deal with selective item nonresponse in the model’s dependent variable. Our approach is based on instrumental variables that affect selection only through potential outcomes. In addition, we allow for endogenous regressors. We establish identification of the structural parameter and propose a simple two-step estimation procedure for it. Our estimator is consistent and robust against biases that would prevail when assuming missingness at random. We implement the estimation procedure using firm-level survey data and a binary instrumental variable to estimate the effect of outsourcing on productivity.

Keywords: endogenous selection, IV-estimation, inverse probability weighting, missing data, productivity, outsourcing, semiparametric estimation

JEL Classification: C14, C36, D24, L24

Suggested Citation

Breunig, Christoph and Kummer, Michael and Ohnemus, Jörg and Viete, Steffen, IT Outsourcing and Firm Productivity: Eliminating Bias from Selective Missingness in the Dependent Variable (December 15, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-092, Available at SSRN: https://ssrn.com/abstract=2896759 or http://dx.doi.org/10.2139/ssrn.2896759

Christoph Breunig

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Michael Kummer (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Jörg Ohnemus

Centre for European Economic Research (ZEW) ( email )

D-68034 Mannheim
Germany

Steffen Viete

German Council of Economic Experts ( email )

Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
Germany

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