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Correcting for Truncation Bias Caused by a Latent Truncation Variable

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  • David E. Bloom
  • Mark R. Killingsworth

Abstract

We discuss estimation of the model Y[sub i] = X[sub i]b[sub y] + e[sub Yi] and T[sub i] =X[sub i]b[sub T] + e[sub Ti] when data on the continuous dependent variable Y and on the independent variables X are observed if the "truncation variable" T > 0 and when T is latent. This case is distinct from both (i) the "censored sample" case, in which Y data are available if T > 0, T is latent and X data are available for all observations, and (ii) the "observed truncation variable" case, in which both Y and X are observed if T > 0 and in which the actual value of T is observed whenever T > O. We derive a maximum-likelihood procedure for estimating this model and discuss identification and estimation.

Suggested Citation

  • David E. Bloom & Mark R. Killingsworth, 1984. "Correcting for Truncation Bias Caused by a Latent Truncation Variable," NBER Technical Working Papers 0038, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberte:0038
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    1. Jerry A. Hausman & David A. Wise, 1976. "The Evaluation of Results from Truncated Samples: The New Jersey Income Maintenance Experiment," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 421-445, National Bureau of Economic Research, Inc.
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    10. R Crouchley, 1998. "Testing for Sample-Selection Bias Due to Location Effects in Work-History Data Collected Retrospectively from a Geographically Based Sample," Environment and Planning A, , vol. 30(12), pages 2195-2210, December.
    11. M. Shahe Emran & William Greene & Forhad Shilpi, 2018. "When Measure Matters: Coresidency, Truncation Bias, and Intergenerational Mobility in Developing Countries," Journal of Human Resources, University of Wisconsin Press, vol. 53(3), pages 589-607.
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    14. Jonathan Yoder, 2002. "Estimation of Wildlife-Inflicted Property Damage and Abatement Based on Compensation Program Claims Data," Land Economics, University of Wisconsin Press, vol. 78(1), pages 45-59.
    15. Mata, Jose, 1996. "Markets, entrepreneurs and the size of new firms," Economics Letters, Elsevier, vol. 52(1), pages 89-94, July.
    16. Colombo, Massimo G. & Grilli, Luca, 2005. "Start-up size: The role of external financing," Economics Letters, Elsevier, vol. 88(2), pages 243-250, August.
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