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(by Nigel Melville)
Movestay is widely used in the Stata community.
Here is a document from Dan Powers that provides clear explanation of switc=
hing models in stata:
http://umich.com.cn/teaching/download/20092/CDAcoursematerials/handouts/Sel=
ectRegQ.pdf
If you visit the document by Powers, you will see a simulation example on p=
age 12-13 of switching regression. The data generating process is given on =
page 9.
When I run the same model as that on page 12/13,
I get the following:
[cid:3379615321_13702523]
As you can see, the rho1 (selection 1 FALSE) is .3143.
In Stata movestay (widely used program) the FALSE selection is rho2 and is =
given by -.3143.
There is a different sign here.
My conclusions, based on the discussion in Powers on pages 8-9 on "Interpre=
ting the Covariance Parameters" is that
1. Powers starts with the positive-signed disturbance term in selection =
equation on page 6 (deviating from Maddala), so the rho2 must be changed in=
sign for correct interpretation.
2. Your sampleSelection package starts with the negative signed disturban=
ce (consistent with Maddala) and so the rho1 can be immediately interprete=
d without any sign change.
Anyhow, once again I appreciate this discussion and I think we are getting =
closer to enlightenment :-)
Best, Nigel
Hi Nigel
On 3 February 2011 23:15, Melville, Nigel <npmelv@umich.edu> wrote:
When you say "all error terms are added (rather than subtracted)" this does=
not seem to be consistent with Maddala's (1983) formulation which I have copied b=
elow. Note the negative sign on selection equation 9.62.
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