Collinearity and Two-Step Estimation of Sample Selection Models: Problems, Origins, and Remedies

This paper investigates the origins of the collinearity problems encountered in the two-step estimation method for sample selection models. The analysis reveals several critical misconceptions and deficiencies in the literature. Remedies to the collinearity problems are proposed and evaluated. Monte Carlo experiments as well as an empirical example based on Mroz‘s (1987) data are used to illustrate the practical relevance and importance of the analysis.

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Year of publication:	2000
Authors:	Leung, Siu Fai ; Yu, Shihti
Published in:	Computational Economics. - Society for Computational Economics - SCE, ISSN 0927-7099. - Vol. 15.2000, 3, p. 173-199
Publisher:	Society for Computational Economics - SCE
Subject:	sample selection \| Heckman's two-step method \| collinearity problem \| remedy \| Monte Carlo experiment \| wage equation

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005808982