Smooth Unbiased Multivariate Probability Simulators for Maximum Likelihood Estimation of Limited Dependent Variable Models
We apply a new simulation method that solves the multidimensional probability integrals that arise in maximum likelihood estimation of a broad class of limited dependent variable models. The simulation method has four key features: the simulated choice probabilities are unbiased; they are a continuous and differentiable function of the parameters of the model; they are bounded between 0 and 1; and their computation takes an effort that is nearly linear in the dimension of the probability integral, independent of the magnitudes of the true probabilities. We also show that the new simulation method produces probability estimates with substantially smaller variance than those generated by acceptance-rejection methods or by Stern's (1987) method. The simulated probabilities can therefore be used to revive the Lerman and Manski(1981) procedure of approximating the likelihood function using simulated choice probabilities by overcoming its computational disadvantages.
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| Length: | 25 pages |
| Date of creation: | Sep 1990 |
| Publication status: | Published in Journal of Econometrics (1993), 58: 347-368 |
| Handle: | RePEc:cwl:cwldpp:960 |
| Note: | CFP 846. |
| Contact details of provider: | Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA Phone: (203) 432-3702 Fax: (203) 432-6167 Web page: http://cowles.yale.edu/ More information through EDIRC
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| Order Information: | Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hausman, Jerry A & Wise, David A, 1978.
"A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences,"
Econometrica,
Econometric Society, vol. 46(2), pages 403-426, March.
- J. A. Hausman & D. A. Wise, 1976. "A Conditional Profit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Working papers 173, Massachusetts Institute of Technology (MIT), Department of Economics.
- Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
- McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
- Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
- Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches†& M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
- Vassilis A. Hajivassiliou & Daniel L. McFadden, 1998. "The Method of Simulated Scores for the Estimation of LDV Models," Econometrica, Econometric Society, vol. 66(4), pages 863-896, July.
- Vassilis A. Hajivassiliou & Daniel L. McFadden, 1993. "The Method of Simulated Scores for the Estimation of LDV Models," Working Papers _023, Yale University.
- V A Hajivassiliou & DL McFadden, 1997. "The Method of Simulated Scores for the Estimation of LDV Models," STICERD - Econometrics Paper Series 328, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Stern, Steven, 1992. "A Method for Smoothing Simulated Moments of Discrete Probabilities in Multinomial Probit Models," Econometrica, Econometric Society, vol. 60(4), pages 943-952, July. Full references (including those not matched with items on IDEAS)
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