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Consistent estimation in pseudo panels in the presence of selection bias

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  • Mora, Jhon James
  • Muro, Juan

Abstract

In the presence of selection bias the traditional estimators for pseudo panel data models are inconsistent. This paper discusses a method to achieve consistency in static linear pseudo panels in the presence of selection bias and a testing procedure for sample selection bias. The authors' approach uses a bias correction term proportional to the inverse Mills ratio with argument equal to the "normit" of a consistent estimation of the conditional probability of being observed given cohort membership. Monte Carlo analysis shows the test does not reject the null for fixed T at a 5% significance level in finite samples. As a "side effect" the authors utilize the enlarged pseudo panel to provide a GMM consistent estimation of the pseudo panel parameters under rejection of the null and apply the procedure to estimate the rate of return to education in Colombia.

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  • Mora, Jhon James & Muro, Juan, 2014. "Consistent estimation in pseudo panels in the presence of selection bias," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-25.
    • Handle: RePEc:zbw:ifweej:201443
    DOI: 10.5018/economics-ejournal.ja.2014-43
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    Cited by:

    1. Pallavi Panda, 2020. "Selective Mortality and Malnutrition in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(4), pages 861-890, December.

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    More about this item

    Keywords

    Repeated cross-section models; selectivity bias testing; returns to education;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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