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Estimation of an Endogenous Switching Regression Model with Discrete Dependent Variables: Monte-Carlo Analysis and Empirical Application of Three Estimators

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  • Kimhi, Ayal

Abstract

The performances of alternative two-stage estimators for the endogenous switching regression model with discrete dependent variables are compared, with regard to their usefulness as starting values for maximum likelihood estimation. This is especially important in the presence of large correlation coefficients, in which case maximum likelihood procedures have difficulties to converge. Monte-Carlo simulations indicate that an estimator that corrects for conditional heteroskedasticity of the residuals is superior in almost all instances, and especially when maximum likelihood is problematic. This result is also obtained in an empirical example in which off-farm work participation equations of farm women are conditional on farm work participation status.

Suggested Citation

  • Kimhi, Ayal, 1995. "Estimation of an Endogenous Switching Regression Model with Discrete Dependent Variables: Monte-Carlo Analysis and Empirical Application of Three Estimators," Working Papers 232677, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    • Handle: RePEc:ags:huaewp:232677
    DOI: 10.22004/ag.econ.232677
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    8. Catherine Benjamin & Ayal Kimhi, 2006. "Farm work, off-farm work, and hired farm labour: estimating a discrete-choice model of French farm couples' labour decisions," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 33(2), pages 149-171, June.
    9. Steinbuks Jevgenijs, 2012. "Firms' Investment under Financial and Infrastructure Constraints: Evidence from In-House Generation in Sub-Saharan Africa," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-34, October.
    10. Phiri, Isaac, 2020. "The effect of access to finance on commercialisation of smallholder maize farmers in Eswatini," Research Theses 334755, Collaborative Masters Program in Agricultural and Applied Economics.

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    More about this item

    Keywords

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    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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