Interpreting sample selection effects

Abstract This note examines the structure of a two-sector selection model with a probit selector equation. The sector selected depends on each observation's characteristics, indexed by θi, i − 1,…, N. Each sector has a distinct regression equation and the expected values of the dependent variable for these equations vary with the sector selected and, through the sample selection terms, θi. The sample selection effect is interpreted by examining the differences in the expected values of the dependent variables in the sector equations as the sector selected and θi change. The standard case where there is only one sector is studied as a special case.

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