Misclassification of the Dependent Variable in Binary Choice Models: Evidence from Five Latin American Countries
Misclassification of the dependent variable in binary choice models can result in inconsistency of the parameter estimates. I estimate probit models that treat misclassification probabilities as estimable parameters for three labor market outcomes: formal sector employment, pension contribution and job change. I use Living Standards Measurement Study data from Nicaragua, Peru, Brazil, Guatemala, and Panama. I find that there is significant misclassification in eleven of the sixteen cases that I investigate. If misclassification is present, but is ignored, estimates of the probit parameters and their standard errors are biased toward zero. In most cases, predicted probabilities of the outcomes are significantly affected by misclassification of the dependent variable. Even a moderate degree of misclassification can have substantial effects on the estimated parameters and on many of the predictions.
|Date of creation:||Mar 2007|
|Date of revision:|
|Publication status:||Published in Applied Economics|
|Contact details of provider:|| Postal: Purnell Hall, Newark, Delaware 19716|
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:07-05.. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman)
If references are entirely missing, you can add them using this form.