Estimation in Binary Choice Models with Measurement Errors
AbstractIn this paper we develop a simple maximum likelihood estimator for probit models where the regressors have measurement error. We first assume precise information about the reliability ratios (or, equivalently, the proxy correlations) of the regressors. We then show how reasonable bounds for the parameter estimates can be obtained when only imprecise information is available. The analysis is also extended to situations where the measurement error has non-zero mean and is correlated with the true values of the regressors. An extensive simulation study shows that the estimator works very well, even in quite small samples. Finally the method is applied to data explaining sick leave in Sweden.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2003:4.
Length: 64 pages
Date of creation: 16 Apr 2003
Date of revision: 07 Jul 2003
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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Measurement error; errors-in-variables; probit; binary choice; bounds;
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-21 (All new papers)
- NEP-DCM-2003-04-21 (Discrete Choice Models)
- NEP-ECM-2003-04-24 (Econometrics)
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