Probit Models with Binary Endogenous Regressors
AbstractSample selection and endogeneity are frequent causes of biases in non-experimental empirical studies. In binary models a standard solution involves complex multivariate models. A simple approximation has been shown to work well in bivariate models. This paper extends the approximation to a trivariate model. Simulations show that the approximation outperforms full maximum likelihood while a least squares approximation may be severely biased. The methods are used to estimate the influence of trust in the parliament and politicians on voting- propensity. No previous studies have allowed for endogeneity of trust on voting and it is shown to severely affect the results.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2006-06.
Length: 19 pages
Date of creation: Feb 2006
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endogeneity; multivariate probit; approximation; Monte Carlo simulation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-11 (All new papers)
- NEP-DCM-2006-03-11 (Discrete Choice Models)
- NEP-ECM-2006-03-11 (Econometrics)
- NEP-POL-2006-03-11 (Positive Political Economics)
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