Abstract
In this article we introduce a test for the normality assumption in the sample selection model. The test is based on a flexible parametric specification of the density function of the error terms in the model. This specification follows a Hermite series with bivariate normality as a special case. All parameters of the model are estimated both under normality and under the more general flexible parametric specification, which enables testing for normality using a standard likelihood ratio test. If normality is rejected, then the flexible parametric specification provides consistent parameter estimates. The test has reasonable power, as is shown by a simulation study. The test also detects some types of ignored heteroscedasticity. Finally, we apply the flexible specification of the density to a travel demand model and test for normality in this model.
| Original language | English |
|---|---|
| Pages (from-to) | 31-42 |
| Number of pages | 12 |
| Journal | Journal of Business and Economic Statistics |
| Volume | 21 |
| DOIs | |
| Publication status | Published - 2003 |
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SDG 7 Affordable and Clean Energy
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