Nobel Prize winner: Heckman part 2 (Self-selection: ex married women in…
Nobel Prize winner: Heckman part 2
Self-selection: ex married women in labor force
Market wage w
Work if w > w*
Reservation wage w*: wage at which willing to work
Data on wages:
--> Only observations w for working women (w > w
--> No information on w for non-working women (w < w
Solution two-step estimation:
--> Estimate first whether women works, then – for those women working – estimate determinants of wages
Policy evaluation: so against laissez-faire of his Chicago colleagues
Building on existing methods and techniques
Rational, self-interested behavior
Empirical research goes back a long time.
no serious discussion on how economic theories
could be systematically tested.
Lack of mathematical formulations in early years
Example: Cournot’s “Law of Demand”
Collect data on prices and quantities in a market
--> Cross-section or time-series data -->Other influencing factors
--> More sophisticated methods needed!
--> Econometrics was born
:Econometric models prove nothing.
Development of new caveats and new techniques:
Tinbergen + Frisch (1969 NP)
Applying statistics to economics = econometrics
Haavelmo (1989 NP)
Highlighting identification problem + simultaneity problem
Granger + Engle (2003 NP)
Methods for time series analyses
McFadden + Heckman (2000 NP)
Discrete choice analysis + self-selection correction
Ragnar Frisch and Jan Tinbergen
1969 NP: “for having developed and applied dynamic models for the analysis of economic processes”.
Pioneering work on econometric model building
Theories for stabilization policy and long-term economic planning
Adopted mathematical and statistical methods in economic research.