Probit Models with Binary Endogenous Regressors
Sample selection and endogeneity are frequent causes of biases in non-experimental empirical studies. In binary models a standard solution involves complex multivariate models. A simple approximation has been shown to work well in bivariate models. This paper extends the approximation to a trivariate model. Simulations show that the approximation outperforms full maximum likelihood while a least squares approximation may be severely biased. The methods are used to estimate the influence of trust in the parliament and politicians on voting- propensity. No previous studies have allowed for endogeneity of trust on voting and it is shown to severely affect the results.
|Date of creation:||Feb 2006|
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