Selection-endogenous ordered probit and dynamic ordered probit models
In this presentation we define two qualitatitive response models: 1) Selection Endogenous Dummy Ordered Probit model (SED-OP); 2) a Selection Endogenous Dummy Dynamic Selection Ordered Probit model (SED- DOP). The SED-OP model is a three-equation model constituted of an endogenous dummy equation, a selection equation, and a main equation which has an ordinal response form. The main feature of the model is that the endogenous dummy enters both the selection equation and the main equation. The dynamic SED-DOP model allows both the selection equation and the ordered equation to be dynamic by including lagged individual behaviour. Initial conditions are properly accounted for and free correlation among unobservables entering each of the three equations is allowed. We show how these models can be estimated in Stata using Maximum Simulated Likelihood.
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