Including Prior Information in Probit Model Estimation
AbstractThe effects of including different kinds of prior information in estimation of the probit model is examined within the framework of Bayesian inference. Of interest is the effect on posterior information for coefficients, probabilities and elasticities. In a model designed to explain choice between fixed and variable interest-rate mortgages, we show that using Bayesian inference to include inequality information on the signs of coefficients yields inferences about probabilities and elasticities that are substantially different from those obtained using maximum likelihood estimation. In a second model, concerned with state voting behavior, we find that putting prior information on probabilities, rather than coefficients, has a dramatic effect on the posterior density functions for the model coefficients, probabilities and elasticities.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 816.
Length: 28 pages
Date of creation: 2001
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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More information through EDIRC
Inequality restrictions; Metropolis-Hastings algorithm; Voting choice; Mortgage choice;
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