Misclassification of the Dependent Variable in Binary Choice Models: Evidence from Five Latin American Countries
AbstractMisclassification of the dependent variable in binary choice models can result in inconsistency of the parameter estimates. I estimate probit models that treat misclassification probabilities as estimable parameters for three labor market outcomes: formal sector employment, pension contribution and job change. I use Living Standards Measurement Study data from Nicaragua, Peru, Brazil, Guatemala, and Panama. I find that there is significant misclassification in eleven of the sixteen cases that I investigate. If misclassification is present, but is ignored, estimates of the probit parameters and their standard errors are biased toward zero. In most cases, predicted probabilities of the outcomes are significantly affected by misclassification of the dependent variable. Even a moderate degree of misclassification can have substantial effects on the estimated parameters and on many of the predictions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 07-05.
Length: 33 pages
Date of creation: Mar 2007
Date of revision:
Publication status: Published in Applied Economics
Contact details of provider:
Postal: Purnell Hall, Newark, Delaware 19716
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
Data Quality; Misclassification; Formal Sector; Pension Contributor; Job Change; Nicaragua; Peru; Brazil; Guatemala; Panama;
Other versions of this item:
- Evangelos Falaris, 2011. "Misclassification of the dependent variable in binary choice models: evidence from five Latin American countries," Applied Economics, Taylor & Francis Journals, vol. 43(11), pages 1315-1327.
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
- J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-21 (All new papers)
- NEP-DCM-2007-04-21 (Discrete Choice Models)
- NEP-ECM-2007-04-21 (Econometrics)
- NEP-LAM-2007-04-21 (Central & South America)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.