Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 171: Testing and Correcting for Sample Selection Bias in Discrete Choice Contingent Valuation Studies

Jan Eklöf () and Sune Karlsson ()
Additional contact information
Jan Eklöf: Department of Economic Statistics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Sune Karlsson: Department of Economic Statistics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

Abstract: The discrete choice or ”referendum” contingent valuation technique has become a popular tool for assessing the value of non-market goods. Surveys used in these studies frequently suffer from large non-response which can lead to significant bias in parameter estimates and in the estimate of mean Willingness to Pay. We investigate the properties of tests for sample selection bias and the losses made by applying estimators assuming no sample selection. The effects of sample selection bias can be sizable but bivariate probit estimation give unbiased estimates. A computationally straightforward test for sample selection bias is found to perform well.

Keywords: Bivariate probit; non-response; willingness to pay; omitted variables test

JEL-codes: C25; C34; C35; Q20

38 pages, First version: May 1997. Revised: June 23, 1999.

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