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Performance of Various Estimators for Censored Response Models with Endogenous Regressors

  • Changhui Kang

    ()

    (Department of Economics, Chung-Ang University, Seoul, South Korea)

  • Myoung-jae Lee

    ()

    (Department of Economics, Korea University, Seoul, South Korea)

The paper reviews four approaches (substitution (SUB), control function (CF), system reduced form (SRF) and artificial instrumental regressor (AIR)) dealing with endogenous regressors in censored response models, and compares them through a simulation. Based on mean-squared-error type criteria, CF and AIR perform better than SUB and SRF; in terms of computation, however, SUB and CF are the easiest, closely followed by SRF. Although CF does well in both accounts, its assumptions are restrictive, and CF provides very different results from the other estimators when a real data set is used. Therefore, although the choice of an estimator among the four should be case-specific, for practitioners, we would recommend SUB. Copyright 2010 The Authors. Pacific Economic Review 2010 Blackwell Publishing Asia Pty Ltd

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0905.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0905.

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Length: 23 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:iek:wpaper:0905
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