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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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