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A two recursive equation model to correct for endogeneity in latent class binary probit models

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  • Sarrias, Mauricio

Abstract

This article proposes a two recursive equation model to correct for endogeneity in latent class Probit models. Concretely, it is assumed that there exists an endogenous and continuous variable defined as a predictor, while unobserved heterogeneity is conceptualized as a vector of parameters that varies across individuals following a discrete distribution. A Maximum Likelihood Estimator is provided to estimate the model parameters based on normally distributed random terms and a free code in R software is provided to carry out the estimation procedure. A small Monte Carlo experiment is carried out to analyze the properties of the estimator. Finally, the estimator is applied to analyze the heterogeneous effects of weight on mental well-being.

Suggested Citation

  • Sarrias, Mauricio, 2021. "A two recursive equation model to correct for endogeneity in latent class binary probit models," Journal of choice modelling, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:eejocm:v:40:y:2021:i:c:s1755534521000348
    DOI: 10.1016/j.jocm.2021.100301
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    1. Guerrero B., Thomas E. & Avogadro, Nicolò & Ramos, Raúl, 2025. "Control Function Approach for Addressing Endogeneity in Transport Models: A Case Study on the London–Amsterdam Route," Journal of choice modelling, Elsevier, vol. 54(C).
    2. Wang, Shunchao & Song, Zhanguo, 2024. "Exploring the behavioral stage transition of traveler's adoption of carsharing: An integrated choice and latent variable model," Journal of choice modelling, Elsevier, vol. 51(C).
    3. Sarrias, Mauricio & Blanco, Alejandra, 2022. "Bodyweight and human capital development: Assessing the impact of obesity on socioemotional skills during childhood in Chile," Economics & Human Biology, Elsevier, vol. 47(C).
    4. Álvarez, Inmaculada C. & Barbero, Javier & Orea, Luis & Rodríguez-Pose, Andrés, 2026. "How institutions shape the economic returns to investment in European regions?," Economic Modelling, Elsevier, vol. 155(C).
    5. de Grange, Louis & González, Felipe & Marechal, Matthieu & Troncoso, Rodrigo, 2024. "A consistent moment equations for binary probit models with endogenous variables using instrumental variables," Journal of choice modelling, Elsevier, vol. 53(C).
    6. Pablo Rodriguez & Mauricio Sarrias, 2025. "Instrumental variable estimation with observed and unobserved heterogeneity of the treatment and instrument effect: a latent class approach," Empirical Economics, Springer, vol. 68(2), pages 879-914, February.

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