Censored Probit Estimation with Correlation near the Boundary: A Useful Reparameteriztion
AbstractThe conventional computational algorithms for full information maximum likelihood (FIML) estimation of the censored probit model (see Farber, 1983), will sometimes fail to converge when the estimated value of the correlation coefficient (Ã±) approaches Â±1; even when the true value of Ã± is not at a boundary. We show that a simple reparametrization of the censored probit model may afford straightforward Newton-Raphson convergence to the true FIML estimate for cases in which likelihood maximization under the conventional censored probit parameterization would have failed. Moreover, our method avoids the computational and inferential complications that arise in alternative methods that, based on a specified criterion, suggest fixing the estimated value of Ã± at -1 or +1. For the purpose of illustration the method is used to estimate the determinants of elderly parentsâ€™ receipt of informal care from their children.
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Bibliographic InfoArticle provided by Review of Applied Economics in its journal Review of Applied Economics.
Volume (Year): 2 (2006)
Issue (Month): 1 ()
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sample selection; endogenous treatment effects; endogenous switching; qualitative dependent variables; informal elderly care; Research Methods/ Statistical Methods; I12; C24; C63;
Find related papers by JEL classification:
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
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