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A note on GMM-estimation of probit models with endogenous regressors

  • Joachim Wilde

Dagenais (1999) and Lucchetti (2002) have demonstrated that the naive GMM estimator of Grogger (1990) for the probit model with an endogenous regressor is not consistent. This paper completes their discussion by explaining the reason for the inconsistency and presenting a natural solution. Furthermore, the resulting GMM estimator is analyzed in a Monte-Carlo simulation and compared with alternative estimators.

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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 4.

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Date of creation: Sep 2005
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Handle: RePEc:iwh:dispap:4-05
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  1. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
  2. Riccardo LUCCHETTI, 2000. "Inconsistency Of Naive GMM Estimation For QR Models With Endogenous Regressors," Working Papers 140, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Avery, Robert B & Hansen, Lars Peter & Hotz, V Joseph, 1983. "Multiperiod Probit Models and Orthogonality Condition Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 21-35, February.
  4. Richard W. Blundell & James L. Powell, 2004. "Endogeneity in Semiparametric Binary Response Models," Review of Economic Studies, Wiley Blackwell, vol. 71, pages 655-679, 07.
  5. Daiji Kawaguchi & Hisahiro Naito, 2005. "The efficient moment estimation of the probit model with an endogenous continuous regressor," Hi-Stat Discussion Paper Series d05-106, Institute of Economic Research, Hitotsubashi University.
  6. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
  7. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  8. Dagenais, Marcel G., 1999. "Inconsistency of a proposed nonlinear instrumental variables estimator for probit and logit models with endogenous regressors," Economics Letters, Elsevier, vol. 63(1), pages 19-21, April.
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