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Probit Models with Binary Endogenous Regressors

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Author Info
Jacob Nielsen Arendt (Department of Business and Economics, University of Southern Denmark)
Anders Holm (Department of Sociology, University of Copenhagen)

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Abstract

Sample 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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Publisher Info
Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2006-06.

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Length: 19 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:kud:kuieca:2006_06

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Related research
Keywords: endogeneity; multivariate probit; approximation; Monte Carlo simulation;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lorenzo Cappellari & Stephen P. Jenkins, 2003. "Multivariate probit regression using simulated maximum likelihood," United Kingdom Stata Users' Group Meetings 2003 10, Stata Users Group. [Downloadable!]
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  2. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January. [Downloadable!] (restricted)
  3. Michaelene Cox, 2003. "When Trust Matters: Explaining Differences in Voter Turnout," Journal of Common Market Studies, Blackwell Publishing, vol. 41, pages 757-770, 09. [Downloadable!] (restricted)
  4. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July. [Downloadable!] (restricted)
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  5. Fishe, Raymond P. H. & Trost, R. P. & Lurie, Philip M., 1981. "Labor force earnings and college choice of young women: An examination of selectivity bias and comparative advantage," Economics of Education Review, Elsevier, vol. 1(2), pages 169-191, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lee C. Adkins, . "An Instrumental Variables Probit Estimator Using Gretl," EHUCHAPS, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística). [Downloadable!]
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