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A note on GMM-estimation of probit models with endogenous regressors

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Author Info
Joachim Wilde
Abstract

Dagenais (1999) and Lucchetti (2002) have demonstrated that the naive GMM estimator of Grogger (1990) for the probit model with an endogenous regressor is not consistent. This paper completes their discussion by explaining the reason for the inconsistency and presenting a natural solution. Furthermore, the resulting GMM estimator is analyzed in a Monte-Carlo simulation and compared with alternative estimators.

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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 4-05.

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Date of creation: Sep 2005
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Handle: RePEc:iwh:dispap:4-05

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Related research
Keywords: generalized method of moments; probit model; endogenous regressor;

Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models

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  1. Dagenais, Marcel G., 1999. "Inconsistency of a proposed nonlinear instrumental variables estimator for probit and logit models with endogenous regressors," Economics Letters, Elsevier, vol. 63(1), pages 19-21, April. [Downloadable!] (restricted)
  2. Avery, Robert B & Hansen, Lars Peter & Hotz, V Joseph, 1983. "Multiperiod Probit Models and Orthogonality Condition Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 21-35, February. [Downloadable!] (restricted)
  3. Lucchetti, Riccardo, 2002. "Inconsistency of naive GMM estimation for QR models with endogenous regressors," Economics Letters, Elsevier, vol. 75(2), pages 179-185, April. [Downloadable!] (restricted)
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  4. Daiji Kawaguchi & Hisahiro Naito, 2005. "The efficient moment estimation of the probit model with an endogenous continuous regressor," Hi-Stat Discussion Paper Series d05-106, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
    Other versions:
  6. Richard W. Blundell & James L. Powell, 2004. "Endogeneity in Semiparametric Binary Response Models," Review of Economic Studies, Blackwell Publishing, vol. 71, pages 655-679, 07. [Downloadable!] (restricted)
    Other versions:
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