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Binary Response Models: Logits, Probits and Semiparametrics

  • Joel L. Horowitz
  • N. E. Savin
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    A binary-response model is a mean-regression model in which the dependent variable takes only the values zero and one. This paper describes and illustrates the estimation of logit and probit binary-response models. The linear probability model is also discussed. Reasons for not using this model in applied research are explained and illustrated with data. Semiparametric and nonparametric models are also described. In contrast to logit and probit models, semi- and nonparametric models avoid the restrictive and unrealistic assumption that the analyst knows the functional form of the relation between the dependent variable and the explanatory variables.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.15.4.43
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    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 15 (2001)
    Issue (Month): 4 (Fall)
    Pages: 43-56

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    Handle: RePEc:aea:jecper:v:15:y:2001:i:4:p:43-56
    Note: DOI: 10.1257/jep.15.4.43
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    1. V.A. Hajivassiliou & P. A. Ruud, 1993. "Classical Estimation Methods for LDV Models Using Simulation," Econometrics 9311002, EconWPA.
    2. Hardle, W., 1992. "Applied Nonparametric Methods," Papers 9206, Tilburg - Center for Economic Research.
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    5. Manski, Charles F., 1985. "Semiparametric analysis of discrete response : Asymptotic properties of the maximum score estimator," Journal of Econometrics, Elsevier, vol. 27(3), pages 313-333, March.
    6. Matzkin, Rosa L., 1993. "Nonparametric identification and estimation of polychotomous choice models," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 137-168, July.
    7. Geweke, John & Keane, Michael P & Runkle, David, 1994. "Alternative Computational Approaches to Inference in the Multinomial Probit Model," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 609-32, November.
    8. Horowitz, Joel L, 1992. "A Smoothed Maximum Score Estimator for the Binary Response Model," Econometrica, Econometric Society, vol. 60(3), pages 505-31, May.
    9. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
    10. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    11. Rosa L. Matzkin, 1988. "Nonparametric and Distribution-Free Estimation of the Binary Choice and the Threshold-Crossing Models," Cowles Foundation Discussion Papers 889, Cowles Foundation for Research in Economics, Yale University.
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