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Simultaneous equations in ordered discrete responses with regressor-dependent thresholds

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  • Myoung-Jae Lee
  • Ayal Kimhi

Abstract

The parameters of ordered discrete response (ODR) models are identified only up to a positive scale. In this paper, we examine the identification issue for simultaneous equations with ODR, where the well-known identification problem in simultaneous equations of recovering structural-form parameters from reduced-form parameters is compounded with the ODR identification problem. We allow the thresholds in ODR to be regressor dependent as well as constant; the former is particularly challenging because threshold parameters get mixed with regression parameters, adding one more dimension to the identification problem. We also explore a cross-equation restriction on threshold differences, under which the structural form parameters are fully identified as if the dependent variables are continuously distributed. An empirical example with farm--household joint labour supply is provided to illustrate the identification issues, to show how our proposals work and to apply tests devised for the threshold constancy and cross-equation restrictions. Copyright 2005 Royal Economic Society

Suggested Citation

  • Myoung-Jae Lee & Ayal Kimhi, 2005. "Simultaneous equations in ordered discrete responses with regressor-dependent thresholds," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 176-196, July.
  • Handle: RePEc:ect:emjrnl:v:8:y:2005:i:2:p:176-196
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    Cited by:

    1. Changhui Kang & Myoung-jae Lee, 2010. "Performance Of Various Estimators For Censored Response Models With Endogenous Regressors," Pacific Economic Review, Wiley Blackwell, vol. 15(4), pages 447-463, October.
    2. Myoung-jae Lee, 2008. "Method-of-moment view of linear simultaneous equation systems," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 62(2), pages 230-238.
    3. Myoung-jae Lee & Pao-Li Chang, 2007. "Avoiding arbitrary exclusion restrictions using ratios of reduced-form estimates," Empirical Economics, Springer, vol. 33(2), pages 339-357, September.
    4. Ory, David T, 2007. "Structural Equation Modeling of Relative Desired Travel Amounts," Institute of Transportation Studies, Working Paper Series qt8mj659fp, Institute of Transportation Studies, UC Davis.
    5. Changhui Kang & Myoung-jae Lee, 2014. "Estimation of Binary Response Models With Endogenous Regressors," Pacific Economic Review, Wiley Blackwell, vol. 19(4), pages 502-530, October.
    6. Ory, David Terrance, 2007. "Structural Equation Modeling of Relative Desired Travel Amounts," University of California Transportation Center, Working Papers qt7rb3x52m, University of California Transportation Center.

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