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Parametric Binary Choice Models

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  • Lechner, Michael
  • Lollivier, Stefan
  • Magnac, Thierry

Abstract

This paper discusses the estimation of binary choice panel data models. We begin with different versions of the static random effects model when the explanatory variables are strictly exogenous. Depending on the autocorrelation structure of the errors, different estimators are available and we detail their attractiveness in each situation by trading-off their efficiency and robustness with respect to misspecification. Then, we consider the static model when a time invariant unobservable variable is correlated with the time varying explanatory variables. The non-linearity of binary choice models makes it pretty hard to eliminate individual fixed effects in likelihood functions and moment conditions, because the usual differencing out that works for the linear model does not work here except in special cases. Imposing quite restrictive assumptions is the price to pay to estimate consistently parameters of dynamics for fixed and random effects, in other words cases when the explanatory variables include lagged endogenous variables or are weakly exogenous only.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 398.

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Date of creation: Nov 2005
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Publication status: Published in dans The Econometrics of Panel Data - Fundamentals and Recent Developments in Theory and Practice, sous la direction de Laszlo Matyas et Patrick Sevestre (3rd edition), Springer Verlag, Berlin, 2008.
Handle: RePEc:ide:wpaper:5512

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Cited by:
  1. Michael Lechner, 2008. "Long-Run Labour Market Effects of Individual Sports Activities," SOEPpapers on Multidisciplinary Panel Data Research 114, DIW Berlin, The German Socio-Economic Panel (SOEP).

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