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Omitted Variables and Misspecified Disturbances in the Logit Model

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  • J.S. Cramer

    (University of Amsterdam)

Abstract

In binary discrete regression models like logit or probit the omis-sion of a relevant regressor (even if it is orthogonal) depresses the re-maining b coefficients towards zero. For the probit model, Wooldridge(2002) has shown that this bias does not carry over to the effect ofthe regressor on the outcome. We find by simulations that this alsoholds for logit models, even when the omitted variable leads to severemisspecification of the disturbance. More simulations show that es-timates of these effects by logit analysis are also impervious to puremisspecification of the disturbance.

Suggested Citation

  • J.S. Cramer, 2005. "Omitted Variables and Misspecified Disturbances in the Logit Model," Tinbergen Institute Discussion Papers 05-084/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20050084
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    References listed on IDEAS

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    1. Amemiya, Takeshi & Nold, Frederick C, 1975. "A Modified Logit Model: A Note," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 255-257, May.
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    5. Lee, Lung-Fei, 1982. "Specification error in multinomial logit models : Analysis of the omitted variable bias," Journal of Econometrics, Elsevier, vol. 20(2), pages 197-209, November.
    6. Cramer,J. S., 2011. "Logit Models from Economics and Other Fields," Cambridge Books, Cambridge University Press, number 9780521188036.
    7. Gourieroux,Christian, 2000. "Econometrics of Qualitative Dependent Variables," Cambridge Books, Cambridge University Press, number 9780521589857, January.
    8. Ruud, Paul A, 1983. "Sufficient Conditions for the Consistency of Maximum Likelihood Estimation Despite Misspecifications of Distribution in Multinomial Discrete Choice Models," Econometrica, Econometric Society, vol. 51(1), pages 225-228, January.
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    Cited by:

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    2. Massimiliano Bratti & Daniele Checchi & Guido De Blasio, 2008. "Does the Expansion of Higher Education Increase the Equality of Educational Opportunities? Evidence from Italy," LABOUR, CEIS, vol. 22(s1), pages 53-88, June.
    3. Karki, Dipesh, 2023. "Factors affecting nonpayment of water service by rural households in Nepal," Utilities Policy, Elsevier, vol. 84(C).
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    5. Malakhov, Dmitry, 2018. "Internet usage and TV and online media trust: Case of Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 50, pages 67-89.
    6. Chi-Hsiou D. Hung & Anurag Banerjee & Qingrui Meng, 2017. "Corporate financing and anticipated credit rating changes," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 893-915, May.

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    More about this item

    Keywords

    logit model; omitted variables; misspecification;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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