Estimation of sample selection models with spatial dependence
Article first published online: 30 JUN 2010
Copyright © 2010 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 27, Issue 2, pages 173–204, March 2012
How to Cite
Flores-Lagunes, A. and Schnier, K. E. (2012), Estimation of sample selection models with spatial dependence. J. Appl. Econ., 27: 173–204. doi: 10.1002/jae.1189
- Issue published online: 16 FEB 2012
- Article first published online: 30 JUN 2010
- Manuscript Revised: 11 FEB 2010
- Manuscript Received: 13 APR 2007
We consider the estimation of a sample selection model that exhibits spatial autoregressive errors (SAE). Our methodology is motivated by a two-step strategy where in the first step we estimate a spatial probit model and in the second step (outcome equation) we include an estimated inverse Mills ratio (IMR) as a regressor to control for selection bias. Since the appropriate IMR under SAE depends on a parameter from the second step, both steps are jointly estimated employing the generalized method of moments. We explore the finite sample properties of the estimator using simulations and provide an empirical illustration. Copyright © 2010 John Wiley & Sons, Ltd.