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Viewpoint: Comparing features of convenient estimators for binary choice models with endogenous regressors

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  • Arthur Lewbel
  • Yingying Dong
  • Thomas Tao Yang

Abstract

We discuss the relative advantages and disadvantages of four types of convenient estimators of binary choice models when regressors may be endogenous or mismeasured or when errors are likely to be heteroscedastic. For example, such models arise when treatment is not randomly assigned and outcomes are binary. The estimators we compare are the two-stage least squares linear probability model, maximum likelihood estimation, control function estimators, and special regressor methods. We specifically focus on models and associated estimators that are easy to implement. Also, for calculating choice probabilities and regressor marginal effects, we propose the average index function (AIF), which, unlike the average structural function (ASF), is always easy to estimate.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 3 (August)
Pages: 809-829

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Handle: RePEc:cje:issued:v:45:y:2012:i:3:p:809-829

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References

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  1. Magnac, Thierry & Maurin, Eric, 2004. "Partial Identification in Monotone Binary Models: Discrete Regressors and Interval Data," IDEI Working Papers 280, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2005.
  2. Magnac, Thierry & Maurin, Eric, 2003. "Identification and Information in Monotone Binary Models," IDEI Working Papers 180, Institut d'Économie Industrielle (IDEI), Toulouse, revised Oct 2004.
  3. Stefan Hoderlein, 2009. "Endogenous semiparametric binary choice models with heteroscedasticity," CeMMAP working papers CWP34/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Yingying Dong & Arthur Lewbel, 2012. "A Simple Estimator for Binary Choice Models With Endogenous Regressors," Boston College Working Papers in Economics 807, Boston College Department of Economics.
  5. Jacho-Chávez, David T., 2009. "Efficiency Bounds For Semiparametric Estimation Of Inverse Conditional-Density-Weighted Functions," Econometric Theory, Cambridge University Press, vol. 25(03), pages 847-855, June.
  6. Lewbel, Arthur & Schennach, Susanne M., 2007. "A simple ordered data estimator for inverse density weighted expectations," Journal of Econometrics, Elsevier, vol. 136(1), pages 189-211, January.
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Cited by:
  1. TAKEDA Yosuke & UCHIDA Ichihiro, 2013. "Make or Buy, and/or Cooperate? The Property Rights Approach to Auto Parts Procurement in Japan," Discussion papers 13066, Research Institute of Economy, Trade and Industry (RIETI).
  2. Yasar, Mahmut, 2013. "Political Influence of Exporting and Import-Competing Firms: Evidence from Eastern European and Central Asian Countries," World Development, Elsevier, vol. 51(C), pages 154-168.
  3. Arthur Lewbel & Thomas Tao Yang, 2013. "Identifying the Average Treatment Effect in a Two Threshold Model," Boston College Working Papers in Economics 825, Boston College Department of Economics.

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