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Efficient Probit Estimation with Partially Missing Covariates

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Author Info
Conniffe, Denis () (National University of Ireland, Maynooth)
O'Neill, Donal () (National University of Ireland, Maynooth)

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Abstract

A common approach to dealing with missing data is to estimate the model on the common subset of data, by necessity throwing away potentially useful data. We derive a new probit type estimator for models with missing covariate data where the dependent variable is binary. For the benchmark case of conditional multinormality we show that our estimator is efficient and provide exact formulae for its asymptotic variance. Simulation results show that our estimator outperforms popular alternatives and is robust to departures from the benchmark case. We illustrate our estimator by examining the portfolio allocation decision of Italian households.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4081.

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Length: 42 pages
Date of creation: Mar 2009
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Handle: RePEc:iza:izadps:dp4081

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Related research
Keywords: missing data; probit model; portfolio allocation; risk aversion;

Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

This paper has been announced in the following NEP Reports:

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  1. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-72, March. [Downloadable!] (restricted)
    Other versions:
  2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  3. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 120-137 National Bureau of Economic Research, Inc. [Downloadable!]
  4. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December. [Downloadable!] (restricted)
    Other versions:
  5. Conniffe, Denis, 1985. "Estimating regression equations with common explanatory variables but unequal numbers of observations," Journal of Econometrics, Elsevier, vol. 27(2), pages 179-196, February. [Downloadable!] (restricted)
  6. Patrick Royston, 2004. "Multiple imputation of missing values," Stata Journal, StataCorp LP, vol. 4(3), pages 227-241, September. [Downloadable!]
  7. John Y. Campbell, 2006. "Household Finance," NBER Working Papers 12149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March. [Downloadable!] (restricted)
  9. Brunello, Giorgio & Miniaci, Raffaele, 1999. "The economic returns to schooling for Italian men. An evaluation based on instrumental variables1," Labour Economics, Elsevier, vol. 6(4), pages 509-519, November. [Downloadable!] (restricted)
  10. Chesher, Andrew, 1984. "Improving the Efficiency of Probit Estimators," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 523-27, August. [Downloadable!] (restricted)
  11. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-50, July. [Downloadable!] (restricted)
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    Other versions:
  13. Jeffrey M. Wooldridge, 1999. "Asymptotic Properties of Weighted M-Estimators for Variable Probability Samples," Econometrica, Econometric Society, vol. 67(6), pages 1385-1406, November.
  14. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
  15. Couch, Kenneth A, 1992. "New Evidence on the Long-Term Effects of Employment Training Programs," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 380-88, October. [Downloadable!] (restricted)
  16. Tullio Jappelli & Luigi Pistaferri, 2006. "Intertemporal Choice and Consumption Mobility," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 75-115, 03. [Downloadable!] (restricted)
    Other versions:
  17. Hamermesh, Daniel S., 1999. "LEEping into the future of labor economics: the research potential of linking employer and employee data," Labour Economics, Elsevier, vol. 6(1), pages 25-41, March. [Downloadable!] (restricted)
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