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Performance of Various Estimators for Censored Response Models with Endogenous Regressors

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Author Info

  • Changhui Kang

    ()
    (Department of Economics, Chung-Ang University, Seoul, South Korea)

  • Myoung-jae Lee

    ()
    (Department of Economics, Korea University, Seoul, South Korea)

Abstract

The paper reviews four approaches (substitution (SUB), control function (CF), system reduced form (SRF) and artificial instrumental regressor (AIR)) dealing with endogenous regressors in censored response models, and compares them through a simulation. Based on mean-squared-error type criteria, CF and AIR perform better than SUB and SRF; in terms of computation, however, SUB and CF are the easiest, closely followed by SRF. Although CF does well in both accounts, its assumptions are restrictive, and CF provides very different results from the other estimators when a real data set is used. Therefore, although the choice of an estimator among the four should be case-specific, for practitioners, we would recommend SUB. Copyright 2010 The Authors. Pacific Economic Review 2010 Blackwell Publishing Asia Pty Ltd

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0905.

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Length: 23 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:iek:wpaper:0905

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Keywords: censored response; tobit; endogenous regressors; instruments;

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  1. Arthur Lewbel, 2007. "Coherency And Completeness Of Structural Models Containing A Dummy Endogenous Variable," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1379-1392, November.
  2. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, Elsevier, vol. 25(3), pages 303-325, July.
  3. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 19(1), pages 2-16, January.
  4. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521355643.
  5. Lee, Myoung-Jae, 1996. "Nonparametric Two-Stage Estimation of Simultaneous Equations with Limited Endogenous Regressors," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 12(02), pages 305-330, June.
  6. Richard W. Blundell & James L. Powell, 2004. "Endogeneity in Semiparametric Binary Response Models," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71, pages 655-679, 07.
  7. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 19(1), pages 27-28, January.
  8. Savage, Elizabeth & Wright, Donald J., 2003. "Moral hazard and adverse selection in Australian private hospitals: 1989-1990," Journal of Health Economics, Elsevier, Elsevier, vol. 22(3), pages 331-359, May.
  9. Labeaga, Jose M., 1999. "A double-hurdle rational addiction model with heterogeneity: Estimating the demand for tobacco," Journal of Econometrics, Elsevier, Elsevier, vol. 93(1), pages 49-72, November.
  10. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 679-85, May.
  11. Lee, Myoung-Jae, 1995. "Semi-parametric Estimation of Simultaneous Equations with Limited Dependent Variables: A Case Study of Female Labour Supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(2), pages 187-200, April-Jun.
  12. Lee, Myoung-Jae, 1992. "Winsorized Mean Estimator for Censored Regression," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 8(03), pages 368-382, September.
  13. Changhui Kang, 2011. "Family Size and Educational Investments in Children: Evidence from Private Tutoring Expenditures in South Korea," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 73(1), pages 59-78, 02.
  14. Myoung-Jae Lee & Ayal Kimhi, 2005. "Simultaneous equations in ordered discrete responses with regressor-dependent thresholds," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 8(2), pages 176-196, 07.
  15. Chernozhukov, Victor & Hansen, Christian, 2008. "Instrumental variable quantile regression: A robust inference approach," Journal of Econometrics, Elsevier, Elsevier, vol. 142(1), pages 379-398, January.
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