IDEAS home Printed from https://ideas.repec.org/p/ags/huaewp/232677.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/232677/files/hebrewuniv-workingpapers-9505.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.232677?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Avery, Robert B & Hansen, Lars Peter & Hotz, V Joseph, 1983. "Multiperiod Probit Models and Orthogonality Condition Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 21-35, February.
    2. Lopez, Ramon E., 1982. "Applications Of Duality Theory To Agriculture," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.
    3. Chung L. Huang & Robert Raunikar & Sukant Misra, 1991. "The Application and Economic Interpretation of Selectivity Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 496-501.
    4. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    5. J. G. Tokle & Wallace E. Huffman, 1991. "Local Economic Conditions and Wage Labor Decisions of Farm and Rural Nonfarm Couples," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 652-670.
    6. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    7. Poirier, Dale J. & Ruud, Paul A., 1981. "On the appropriateness of endogenous switching," Journal of Econometrics, Elsevier, vol. 16(2), pages 249-256, June.
    8. Lee, Lung-Fei, 1979. "Identification and Estimation in Binary Choice Models with Limited (Censored) Dependent Variables," Econometrica, Econometric Society, vol. 47(4), pages 977-996, July.
    9. Ayal Kimhi, 1994. "Quasi Maximum Likelihood Estimation of Multivariate Probit Models: Farm Couples' Labor Participation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 828-835.
    10. Yatchew, Adonis & Griliches, Zvi, 1985. "Specification Error in Probit Models," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 134-139, February.
    11. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Steinbuks, J., 2008. "Financial constraints and firms' investment: results of a natural experiment measuring firm response to power interruption," Cambridge Working Papers in Economics 0844, Faculty of Economics, University of Cambridge.
    3. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," ZEW Discussion Papers 16-084, ZEW - Leibniz Centre for European Economic Research.
    4. 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.
    5. Lorenzo Cappellari, 2002. "Do the `working poor' stay poor? An analysis of low pay transitions in Italy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 87-110, May.
    6. Li, Jinghan & Zepeda, Lydia & Gould, Brian W., 2007. "The Demand for Organic Food in the U.S.: An Empirical Assessment," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(3), pages 1-16.
    7. Benjamin, Catherine & Kimhi, Ayal, 2003. "Farm Work, Off-Farm Work, And Hired Farm Labor: Estimating A Discrete-Choice Model Of French Farm Couples' Labor Decisions," Discussion Papers 14990, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    8. 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.
    9. Machiel van Dijk & Michiel Bijlsma & Marc Pomp, 2006. "The price of free advice," CPB Discussion Paper 66, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Blomquist, Glenn C. & Dickie, Mark & O'Conor, Richard M., 2011. "Willingness to pay for improving fatality risks and asthma symptoms: Values for children and adults of all ages," Resource and Energy Economics, Elsevier, vol. 33(2), pages 410-425, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kimhi, Ayal, 1991. "Estimation of Endogenous Switching Regression Models with Discrete Dependent Variables: An Application to the Estimation of Farm Women's Farm and Off-Farm Participation Equations," Working Papers 197766, University of Maryland, Department of Agricultural and Resource Economics.
    2. Shelly Lundberg & Daniel Klepinger & Robert Plotnick, 1998. "Teen Childbearing and Human Capital: Does Timing Matter?," Discussion Papers in Economics at the University of Washington 0057, Department of Economics at the University of Washington.
    3. Fernando Rios-Avila & Gustavo Canavire-Bacarreza, 2018. "Standard-error correction in two-stage optimization models: A quasi–maximum likelihood estimation approach," Stata Journal, StataCorp LP, vol. 18(1), pages 206-222, March.
    4. Christian Bayer & Falko Juessen, 2012. "On the Dynamics of Interstate Migration: Migration Costs and Self-Selection," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 377-401, July.
    5. Hirokatsu Asano, 2010. "Estimating irreversible investment with financial constraints: an application of switching regression models," Applied Economics, Taylor & Francis Journals, vol. 42(2), pages 211-222.
    6. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441, Elsevier.
    7. Luc Arrondel & François-Charles Wolff, 1998. "La nature des transferts inter vivos en France : investissements humains, aides financières et transmission du patrimoine," Économie et Prévision, Programme National Persée, vol. 135(4), pages 1-27.
    8. Fernandez-Cornejo, Jorge & Mishra, Ashok K. & Nehring, Richard F. & Hendricks, Chad & Southern, Malaya & Gregory, Alexandra, 2007. "Off-Farm Income, Technology Adoption, And Farm Economic Performance," Economic Research Report 7234, United States Department of Agriculture, Economic Research Service.
    9. Robert Innes & Abdoul G. Sam, 2008. "Voluntary Pollution Reductions and the Enforcement of Environmental Law: An Empirical Study of the 33/50 Program," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 271-296, May.
    10. Harsche, Johannes, 2007. "Bestimmungsfaktoren für das Erwerbsverhalten von Landwirten unter besonderer Berücksichtigung der Unternehmereigenschaften," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 56(02), pages 1-12.
    11. Benjamin, Catherine & Kimhi, Ayal, 2003. "Farm Work, Off-Farm Work, And Hired Farm Labor: Estimating A Discrete-Choice Model Of French Farm Couples' Labor Decisions," Discussion Papers 14990, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    12. Boogen, Nina & Datta, Souvik & Filippini, Massimo, 2017. "Demand-side management by electric utilities in Switzerland: Analyzing its impact on residential electricity demand," Energy Economics, Elsevier, vol. 64(C), pages 402-414.
    13. Guevara, C. Angelo & Ben-Akiva, Moshe E., 2013. "Sampling of alternatives in Multivariate Extreme Value (MEV) models," Transportation Research Part B: Methodological, Elsevier, vol. 48(C), pages 31-52.
    14. Francesca Molinari, 2020. "Microeconometrics with Partial Identi?cation," CeMMAP working papers CWP15/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    15. Ayal Kimhi, 2004. "Family Composition and Off-Farm Participation Decisions in Israeli Farm Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 502-512.
    16. Huffman, Wallace E. & El-Osta, Hisham, 1997. "Off-Farm Work Participation, Off-Farm Labor Supply and On-Farm Labor Demand of U.S. Farm Operators," ISU General Staff Papers 199712010800001290, Iowa State University, Department of Economics.
    17. Fernández-Val, Iván & Vella, Francis, 2011. "Bias corrections for two-step fixed effects panel data estimators," Journal of Econometrics, Elsevier, vol. 163(2), pages 144-162, August.
    18. Datta, Souvik, 2019. "Decoupling and demand-side management: Evidence from the US electric industry," Energy Policy, Elsevier, vol. 132(C), pages 175-184.
    19. Haile, Kaleab K. & Nillesen, Eleonora & Tirivayi, Nyasha, 2020. "Impact of formal climate risk transfer mechanisms on risk-aversion: Empirical evidence from rural Ethiopia," World Development, Elsevier, vol. 130(C).
    20. Bauer, Thomas K. & Bender, Stefan & Paloyo, Alfredo R. & Schmidt, Christoph M., 2014. "Do guns displace books? The impact of compulsory military service on educational attainment," Economics Letters, Elsevier, vol. 124(3), pages 513-515.

    More about this item

    Keywords

    Agricultural and Food Policy;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:huaewp:232677. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/caehuil.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.