Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 239: Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure
Alpaslan Akay () and Elias Tsakas ()
Additional contact information
Alpaslan Akay: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Elias Tsakas: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Abstract: In this paper we discuss the differences between the average marginal effect and the marginal effect of the average individual in sample selection models, estimated by Heckman's two step procedure. We show that the bias that emerges as a consequence of interchanging them, could be very significant, even in the limit. We suggest a computationally cheap approximation method, which corrects the bias in a large extent. We illustrate the implications of our method with an empirical application of earnings assimilation and a small Monte Carlo simulation.
Keywords: Heckman's two step estimator; average marginal effect; marginal effect of the average individual; earnings assimilation
16 pages, January 19, 2006
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