A SIMPLE ESTIMATOR FOR SIMULTANEOUS MODELS WITH CENSORED ENDOGENOUS REGRESSORS

This paper presents a simple two step estimator for models with censored endogenous regressors and sample selection bias. The approach unifies the literature on censored endogenous regressors and sample selection bias and provides extensions. The procedure employs generalized residuals to adjust for the inconsistency caused by the endogeneity of the censored regressors. The paper also provides two new tests of weak exogeneity. An empirical example, examining the trade off between fringe benefits and wages, indicates that the estimation procedure works well. A monte carlo experiment suggests that the proposed tests have good power properties.