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Identification and estimation in a correlated random coefficients binary response model

  • Stefan Hoderlein


    (Institute for Fiscal Studies and Boston College)

  • Robert Sherman

    (Institute for Fiscal Studies)

We study identification and estimation in a binary response model with random coefficients B allowed to be correlated with regressors X. Our objective is to identify the mean of the distribution of B and estimate a trimmed mean of this distribution. Like Imbens and Newey (2009), we use instruments Z and a control vector V to make X independent of B given V. A consequent conditional median restriction identifies the mean of B given V. Averaging over V identifies the mean of B. This leads to an analogous localise-then-average approach to estimation. We estimate conditional means with localised smooth maximum score estimators and average to obtain a ?n-consistent and asymptotically normal estimator of a trimmed mean of the distribution of B. The method can be adapted to models with nonrandom coefficients to produce ?n-consistent and asymptotically normal estimators under the conditional median restrictions. We explore small sample performance through simulations, and present an application.

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Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP42/12.

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Date of creation: 17 Dec 2012
Date of revision:
Handle: RePEc:ifs:cemmap:42/12
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