Estimation of Semiparametric Models in the Presence of Endogeneity and Sample Selection

Siddhartha Chib | Edward Greenberg | Ivan Jeliazkov
Washington University in St. Louis | Washington University in St. Louis | University of California, Irvine

Abstract

We analyze a semiparametric model for data that suffer from the problems of incidental truncation, where some of the data are observed for only part of the sample with a probability that depends on a selection equation, and of endogeneity, where a covariate is correlated with the disturbance term. The introduction of nonparametric functions in the model permits significant flexibility in the way covariates affect response variables. We present a Bayesian method for the analysis of such models that allows us to consider general systems of outcome variables and endogenous regressors that are continuous, binary, censored, or ordered. The methods are applied in a model of women's labor force participation and log-wage determination that accounts for endogeneity, incidental truncation, and non-linear covariate effects.

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