Sample Selection and Heckman's Method | Estimation Methods | Stata Tutorials Topic 46

Stata Tutorials Topic 46: Sample Selection and Heckman's Method | Regression Analysis and Estimation Methods Using Stata
Hi, I am Bob. We will explore sample selection today. We will learn how to follow Heckman's two-step procedure in Stata to alleviate the endogenous sample selection bias. Sample selection bias happens when the estimation sample cannot represent the entire population we are interested in. A classic example in econometrics textbooks is the women's wage equation.
Please download the dataset for this topic:
drive.google.com/file/d/1ZJDM...
#SampleSelection #heckman #twostep #SampleSelectionBias #endogenous #exogenous #Stata #RegressionAnalysisandEstimationMethods #tutorial
The Stata commands in this video:
*Open dataset
use CPS91.dta, clear
describe
tabulate inlf
*OLS
regress lwage educ exper expersq black hispanic
estimates store OLS
*Heckman two-step procedure manually
*Step1: Linear predictions from selection regression
probit inlf educ exper expersq black hispanic nwifeinc kidlt6
predict inlfhat, xb
generate lambdahat=normalden(inlfhat)/normal(inlfhat)
*Step2: Include inverse Mills ratio in wage regression
regress lwage educ exper expersq black hispanic lambdahat
estimates store SSC1
esttab OLS SSC1, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f) compress
*The heckman command
heckman lwage educ exper expersq black hispanic, select(inlf=educ exper expersq black hispanic nwifeinc kidlt6) twostep mills(lambhat)
estimates store SSC2
esttab OLS SSC1 SSC2, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f) compress
summarize lambdahat lambhat
*An equivalent method
probit inlf educ exper expersq black hispanic nwifeinc kidlt6
predict inlfhat_pr, pr
regress lwage educ exper expersq black hispanic inlfhat_pr
estimates store SSC3
esttab OLS SSC1 SSC2 SSC3, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f) compress
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