Coherence and Completeness of Structural Models Containing a Dummy Endogenous Variable
AbstractLet y be a vector endogenous variables and let w be a vector of covariates, parameters and errors or unobservables that together are assumed to determine y. A structural model y=H(y,w) is complete and coherent if it has a well defined reduced form, meaning that for any value of w there exists a unique value for y. Coherence and completeness simplifies identification, and is required for many estimators and many model applications. Incoherency or incompleteness can arise in models with multiple decision makers such as games, or when the decision making of individuals is either incorrectly or incompletely specified. This paper provides necessary and sufficient conditions for the coherence and completeness of simultaneous equation systems where one equation is a binomial response. Examples are dummy endogenous regressor models, regime switching regressions, treatment response models, sample selection models, endogenous choice systems, and determining if a pair of binary choices are substitutes or complements.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 456.
Length: 17 pages
Date of creation: 15 Sep 1997
Date of revision: 04 Sep 2006
Note: Previously circulated as "Coherence of Structural Models Containing a Dummy Endogenous Variable"
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binary choice; binomial response; simultaneous equations; endogeneity; coherency; latent variable models;
Other versions of this item:
- Arthur Lewbel, 2007. "Coherency And Completeness Of Structural Models Containing A Dummy Endogenous Variable," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1379-1392, November.
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