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Identification in a Generalization of Bivariate Probit Models with Endogenous Regressors

Author

Listed:
  • Sukjin Han

    () (Department of Economics, University of Texas at Austin)

  • Edward J. Vytlacil

    () (Department of Economics, New York University)

Abstract

This paper provides identification results for a class of models specified by a triangular system of two equations with binary endogenous variables. The joint distribution of the latent error terms is specified through a parametric copula structure, including the normal copula as a special case, while the marginal distributions of the latent error terms are allowed to be arbitrary but known. This class of models includes bivariate probit models as a special case. The paper demonstrates that an exclusion restriction is necessary and sufficient for globally identification of the model parameters with the excluded variable allowed to be binary. Based on this result, identification is achieved in a full model where common exogenous regressors that are present in both equations and excluded instruments are possibly more general than discretely distributed.

Suggested Citation

  • Sukjin Han & Edward J. Vytlacil, 2013. "Identification in a Generalization of Bivariate Probit Models with Endogenous Regressors," Department of Economics Working Papers 130908, The University of Texas at Austin, Department of Economics.
  • Handle: RePEc:tex:wpaper:130908
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    File Function: First version, 2013
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    Cited by:

    1. Mourifié, Ismael & Méango, Romuald, 2014. "A note on the identification in two equations probit model with dummy endogenous regressor," Economics Letters, Elsevier, vol. 125(3), pages 360-363.

    More about this item

    Keywords

    Identification; triangular threshold crossing model; bivariate probit model; endogenous variables; binary response; copula; exclusion restriction;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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