**Heckman Two-Step Estimation**

**Definition of Heckman Two-Step Estimation:**
Heckman two-step estimation is a way of estimating treatment effects when the treated sample is
self-selected and so the effects of the treatment are confounded with the
population that chose it because they expected it would help -- the classic
example is that college educations may be selected by those most likely to
benefit.

Taking that example, we wish to advance past the following regression:

w_{i} = a + bX_{i} + dC_{i} + e_{i}

where i indexes people, w_{i} is the wage (or other outcome variable)
for agent i, X_{i} are variables predicting i's wage, and
C_{i} is 1 if i went to college and 0 if not. e_{i} is the
remaining error after least squares estimation of a, b, and d.
(Econterms)

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