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Estimation of Gaussian multinomial endogenous switching model

Author

Listed:
  • Kossova, Elena

    (National Research University Higher School of Economics (NRU HSE), Moscow, Russian Federation)

  • Potanin, Bogdan

    (National Research University Higher School of Economics (NRU HSE), Moscow, Russian Federation)

Abstract

We propose a two-step estimation procedure for multinomial endogenous switching model assuming joint normality of random errors. Simulated data analysis suggests that our method outperforms popular alternatives when independence of irrelevant alternatives (IIA) assumption is violated. We also apply our method to estimate marriage male premium. We have found statistical evidence that this premium is negative for officially married men and positive for unofficially married men.

Suggested Citation

  • Kossova, Elena & Potanin, Bogdan, 2022. "Estimation of Gaussian multinomial endogenous switching model," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 67, pages 121-143.
    • Handle: RePEc:ris:apltrx:0455
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    References listed on IDEAS

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    1. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-362, March.
    2. Kossova, Elena & Kupriianova, Liubov & Potanin, Bogdan, 2020. "Parametric and semiparametric multivariate sample selection models estimators’ accuracy: Comparative analysis on simulated data," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 119-139.
    3. François Bourguignon & Martin Fournier & Marc Gurgand, 2007. "Selection Bias Corrections Based On The Multinomial Logit Model: Monte Carlo Comparisons," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 174-205, February.
    4. Whitney K. Newey, 2009. "Two-step series estimation of sample selection models," Econometrics Journal, Royal Economic Society, vol. 12(s1), pages 217-229, January.
    5. Schmertmann, Carl P., 1994. "Selectivity bias correction methods in polychotomous sample selection models," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 101-132.
    6. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    7. Pigini Claudia, 2015. "Bivariate Non-Normality in the Sample Selection Model," Journal of Econometric Methods, De Gruyter, vol. 4(1), pages 123-144, January.
    8. Elena Kossova & Bogdan Potanin & Maria Sheluntcova, 2020. "Estimating effect of marriage on male wages in Russia," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(7), pages 1649-1667, April.
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    10. Kossova, Elena & Potanin, Bogdan, 2018. "Heckman method and switching regression model multivariate generalization," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 50, pages 114-143.
    11. B. S. Potanin, 2019. "Estimating the Effect of Higher Education on an Employee’s Wage," Studies on Russian Economic Development, Springer, vol. 30(3), pages 319-326, May.
    12. Lukyanova, Anna, 2021. "What keeps public sector workers in low-paid jobs? The role of self-selection and non-cognitive skills in explaining the public-private wage gap," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 62, pages 32-53.
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    More about this item

    Keywords

    sample selection; switching regression model; endogeneity; marriage male premium;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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