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Simulation-based estimation of Tobit model with random effects

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  • Calzolari, Giorgio
  • Magazzini, Laura
  • Mealli, Fabrizia

Abstract

The estimation of limited dependent variable panel data models usually involves objective functions in which integrals appear without a closed form solution: this is the case of the panel data Tobit model with random effects. Recently, simulation methods have shown to be useful in the inference process, as they offer methods to approximate such integrals (Laroque, Salanie, 1989; Gouri´eroux, Monfort, 1991, 1993; Hajivassiliou, McFadden, 1998; Mealli, Rampichini, 1999; Inkmann, 2000). Although the asymptotic performances of such methods are known and their application has been successfully undertaken, more precise ideas on their finite sample performance and computational efficiency is still needed. In this paper we propose to use the method of indirect inference, using different auxiliary models, and the simulated maximum likelihood to estimate these models. We use a panel data Tobit model with a simple correlation structure in the unobservables (i.e. a one-factor structure), but the model could be easily extended. Using both simulated and real data, we show the perfomances of the proposed methods in finite samples. The application on real data is concerned with a model of female labour supply.

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File URL: http://mpra.ub.uni-muenchen.de/22985/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22985.

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Date of creation: 2001
Date of revision: 2001
Handle: RePEc:pra:mprapa:22985

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Keywords: Tobit model; random effects; simulation based estimation; indirect estimation;

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  1. Laroque, Guy & Salanie, Bernard, 1989. "Estimation of Multi-market Fix-Price Models: An Application of Pseudo Maximum Likelihood Methods," Econometrica, Econometric Society, vol. 57(4), pages 831-60, July.
  2. Joachim Inkmann, 1999. "Misspecified heteroskedasticity in the panel probit model: A small sample comparison of GMM and SML estimators," Finance 9904003, EconWPA.
  3. Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-65, May.
  4. Vassilis A. Hajivassiliou & Daniel L. McFadden, 1993. "The Method of Simulated Scores for the Estimation of LDV Models," Working Papers _023, Yale University.
  5. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
  6. G. S. Maddala, 1987. "Limited Dependent Variable Models Using Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 22(3), pages 307-338.
  7. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De.
  8. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, vol. 12(04), pages 657-681, October.
  9. Mealli, Fabrizia & Rampichini, Carla, 1999. "Estimating binary multilevel models through indirect inference," Computational Statistics & Data Analysis, Elsevier, vol. 29(3), pages 313-324, January.
  10. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
  11. Honore, Bo E., 1993. "Orthogonality conditions for Tobit models with fixed effects and lagged dependent variables," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 35-61, September.
  12. Giorgio Calzolari & F. Di Iorio & G. Fiorentini, 1999. "Indirect Estimation of Just-Identified Models with Control Variates," Econometrics Working Papers Archive quaderno46, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
  13. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 47-74, January.
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