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2-stage Heckman

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2-stage Heckman

I have a question regarding the output of my heckman model.  I am testing how institutional investor presence affects firm investments.  However, it has been argued that institutions choose to invest in firms based on the firm investment strategies, performance, etc.  

 

I am proposing using a 2SLS Heckman approach to correct for this sample bias.  However, I also have a simultaneity issue because what I'm really interested in is how institutional investors (dumii) affect investments (capx).

 

endogeneity problem:   dumii = capx q lnat salesgrowth lev;

equation of interest:      capx = dumii liq salesgrowth vol rec;

 

 

Would using Heckman be appropriate in this situation?  If I estimate equation (1) and substitute in invese mills ratio into (2), I cannot also include "dumii" as an independent variable because it is a linear combination of thee inverse mills ratio.  In this case, would the coefficient on the inverse mills ratio act as an instrumental variable for dumii?  Ie: will the coefficient on lambda give me a clue as to how institutional investors affect investments?

 

The code I run is:

 

Proc qlm data=data heckit;

Model dumii = adjcapxyq q lnat salesgrowth lev / discrete;                                 *selection equation;

Model adjcapxyq = liq salesgrowth vol rec / select(dumii=1);                              *equation of interest;

Run;

 

 

Thank you for your help in advance!!!

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