A Heckman Selection- t Model

Yulia V. Marchenko, Marc G. Genton

Research output: Contribution to journalArticlepeer-review

52 Scopus citations

Abstract

Sample selection arises often in practice as a result of the partial observability of the outcome of interest in a study. In the presence of sample selection, the observed data do not represent a random sample from the population, even after controlling for explanatory variables. That is, data are missing not at random. Thus, standard analysis using only complete cases will lead to biased results. Heckman introduced a sample selection model to analyze such data and proposed a full maximum likelihood estimation method under the assumption of normality. The method was criticized in the literature because of its sensitivity to the normality assumption. In practice, data, such as income or expenditure data, often violate the normality assumption because of heavier tails. We first establish a new link between sample selection models and recently studied families of extended skew-elliptical distributions. Then, this allows us to introduce a selection-t (SLt) model, which models the error distribution using a Student's t distribution. We study its properties and investigate the finite-sample performance of the maximum likelihood estimators for this model. We compare the performance of the SLt model to the conventional Heckman selection-normal (SLN) model and apply it to analyze ambulatory expenditures. Unlike the SLNmodel, our analysis using the SLt model provides statistical evidence for the existence of sample selection bias in these data. We also investigate the performance of the test for sample selection bias based on the SLt model and compare it with the performances of several tests used with the SLN model. Our findings indicate that the latter tests can be misleading in the presence of heavy-tailed data. © 2012 American Statistical Association.
Original languageEnglish (US)
Pages (from-to)304-317
Number of pages14
JournalJournal of the American Statistical Association
Volume107
Issue number497
DOIs
StatePublished - Mar 2012
Externally publishedYes

Fingerprint

Dive into the research topics of 'A Heckman Selection- t Model'. Together they form a unique fingerprint.

Cite this