Estimation in Binary Choice Models with Measurement Errors
In this paper we develop a simple maximum likelihood estimator for probit models where the regressors have measurement error. We first assume precise information about the reliability ratios (or, equivalently, the proxy correlations) of the regressors. We then show how reasonable bounds for the parameter estimates can be obtained when only imprecise information is available. The analysis is also extended to situations where the measurement error has non-zero mean and is correlated with the true values of the regressors. An extensive simulation study shows that the estimator works very well, even in quite small samples. Finally the method is applied to data explaining sick leave in Sweden.
|Date of creation:||16 Apr 2003|
|Date of revision:||07 Jul 2003|
|Note:||Gauss program available|
|Contact details of provider:|| Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden|
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