Endogenous Variables in Binary Choice Models

Bontemps, Christophe and Nauges, Céline (2017) Endogenous Variables in Binary Choice Models: Some Insights for Practitioners. TSE Working Paper, n. 17-855, Toulouse

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Official URL: http://tse-fr.eu/pub/32153

Abstract

The main purpose of this article is to offer practical insights to econometricians wanting to estimate binary choice models featuring a continuous endogenous regressor. We use simulated data to investigate the performance of Lewbel’s special regressor method, an estimator that is relatively easy to implement and that relies on different identification conditions than more common control function and Maximum Likelihood estimators. Our findings confirm that the large support condition is crucial for the special regressor method to perform well and that one should be very cautious when implementing heteroscedasticity corrections and trimming since these could severely bias the final estimates.

Item Type: Monograph (Working Paper)
Sub-title: Some Insights for Practitioners
Language: English
Date: October 2017
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Apr 2018 07:48
Last Modified: 17 Apr 2018 07:48
OAI ID: oai:tse-fr.eu:32153
URI: http://publications.ut-capitole.fr/id/eprint/25726

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