Cr. Ai et Sp. Cassou, EQUIVALENCE OF THE STANDARD AND THE MODIFIED SWITCHING REGRESSION-MODELS, Review of economics and statistics, 78(2), 1996, pp. 365-366
Ophem (1993) employed a switching regression model with earnings enter
ing the choice equation to investigate earnings differentials between
the public and private sectors. Ophem also described a ''modified swit
ching regression model'' in which only the equation for unknown earnin
gs is substituted into the choice equation. He argued the coefficients
in the choice equation can be identified in the modified switching re
gression model without exclusion restrictions and estimates from the m
odified switching regression model are more efficient than estimates f
rom the standard switching regression model. We show that there are fl
aws in Ophem's analysis which invalidate his claims.