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Spatial differencing for sample selection models with ‘site-specific’ unobserved local effects

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  • Alexander Klein
  • Guy Tchuente

Abstract

SummaryThis paper proposes an estimator which combines spatial differencing with a two-step sample selection estimator. We derive identification, estimation, and inference results from ‘site-specific’ unobserved effects. These effects operate at a spatial scale that cannot be captured by administrative borders. Therefore, we use spatial differencing. We show that under justifiable assumptions, the estimator is consistent and asymptotically normal. A Monte Carlo experiment illustrates the small sample properties of our estimator. We apply our procedure to the estimation of a female wage offer equation in the United States and the results show the relevance of spatial differencing to account for ‘site-specific’ unobserved effects.

Suggested Citation

  • Alexander Klein & Guy Tchuente, 2024. "Spatial differencing for sample selection models with ‘site-specific’ unobserved local effects," The Econometrics Journal, Royal Economic Society, vol. 27(2), pages 235-257.
    • Handle: RePEc:oup:emjrnl:v:27:y:2024:i:2:p:235-257.
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