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Omitted Variables and Misspecified Disturbances in the Logit Model

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Author Info
J.S. Cramer () (University of Amsterdam)

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Abstract

In binary discrete regression models like logit or probit the omis- sion of a relevant regressor (even if it is orthogonal) depresses the re- maining b coefficients towards zero. For the probit model, Wooldridge (2002) has shown that this bias does not carry over to the effect of the regressor on the outcome. We find by simulations that this also holds for logit models, even when the omitted variable leads to severe misspecification of the disturbance. More simulations show that es- timates of these effects by logit analysis are also impervious to pure misspecification of the disturbance.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-084/4.

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Date of creation: 15 Sep 2005
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Handle: RePEc:dgr:uvatin:20050084

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Related research
Keywords: logit model; omitted variables; misspecification;

Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models

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References listed on IDEAS
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  1. J. S. Cramer, 2004. "Scoring bank loans that may go wrong: a case study," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 58(3), pages 365-380. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bratti, Massimiliano & Checchi, Daniele & de Blasio, Guido, 2008. "Does the Expansion of Higher Education Increase the Equality of Educational Opportunities? Evidence from Italy," IZA Discussion Papers 3361, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Annemiek Vuren & Daniel Vuuren, 2007. "Financial Incentives in Disability Insurance in the Netherlands," De Economist, Springer, vol. 155(1), pages 73-98, March. [Downloadable!] (restricted)
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