A Control Function Approach to Estimating Dynamic Probit Models with Endogenous Regressors, with an Application to the Study of Poverty Persistence in China
AbstractThis paper proposes a parametric approach to estimating a dynamic binary response panel data model that allows for endogenous contemporaneous regressors. Such a model is of particular value for settings in which one wants to estimate the effects of an endogenous treatment on a binary outcome. In order to demonstrate the usefulness of the approach, we use it to examine the impact of rural-urban migration on the likelihood that households in rural China fall below the poverty line. In this application, it is shown that migration is important for reducing the likelihood that poor households remain in poverty and that non-poor households fall into poverty. Furthermore, it is demonstrated that failure to control for unobserved heterogeneity would lead the researcher to underestimate the impact of migrant labor markets on reducing the probability of falling into poverty.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6887.
Length: 44 pages
Date of creation: Sep 2012
Date of revision:
Publication status: published as 'A Control Function Approach to Estimating Dynamic Probit Models with Endogenous Regressors' in: Journal of Econometric Methods, 2013, 2 (1), 69-87
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Other versions of this item:
- Giles, John & Murtazashvili, Irina, 2010. "A control function approach to estimating dynamic probit models with endogenous regressors, with an application to the study of poverty persistence in China," Policy Research Working Paper Series 5400, The World Bank.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics
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