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Identification and Decompositions in Probit and Logit Models

Author

Listed:
  • Choe, Chung

    (Konkuk University)

  • Jung, Seeun

    (Inha University)

  • Oaxaca, Ronald L.

    (University of Arizona)

Abstract

Probit and logit models typically require a normalization on the error variance for model identification. This paper shows that in the context of sample mean probability decompositions, error variance normalizations preclude estimation of the effects of group differences in the latent variable model parameters. An empirical example is provided for a model in which the error variances are identified. This identification allows the effects of group differences in the latent variable model parameters to be estimated.

Suggested Citation

  • Choe, Chung & Jung, Seeun & Oaxaca, Ronald L., 2017. "Identification and Decompositions in Probit and Logit Models," IZA Discussion Papers 10530, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10530
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    References listed on IDEAS

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    1. Robert Gertner, 1993. "Game Shows and Economic Behavior: Risk-Taking on "Card Sharks"," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 507-521.
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    9. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
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    2. Sierminska, Eva & Oaxaca, Ronald L., 2022. "Gender differences in economics PhD field specializations with correlated choices," Labour Economics, Elsevier, vol. 79(C).

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    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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