A Detailed Decomposition for Limited Dependent Variable Models
AbstractIn this paper, we consider a detailed decomposition method for limited dependent variable models. That means, we propose a method to decompose the differential in the (limited dependent) outcome variable between two groups into the contributions of the explanatory variables. We provide a theoretical derivation of the detailed decomposition and show how this decomposition can be estimated consistently. In contrast to decomposition approaches already presented in the literature, our method leads to a unique decomposition and accounts for the nonlinearity of the underlying econometric model in a rather intuitive way. Our results can be applied to the most common limited dependent variable models such as probit, logit and tobit models.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-506.
Length: 17 pages
Date of creation: Oct 2012
Date of revision:
Decomposition methods; detailed decomposition; explained di erential; limited dependent variable models; probit; logit; tobit;
Find related papers by JEL classification:
- C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
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