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Endogeneity in semiparametric binary response models

Blundell, R.; Powell, J.L.; (2003) Endogeneity in semiparametric binary response models. Green open access

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Abstract

This paper develops and implements semiparametric methods for estimating binary response (binary choice) models with continuous endogenous regressors. It extends existing results on semiparametric estimation in single index binary response models to the case of endogenous regressors. It develops a control function approach to account for endogeneity in triangular and fully simulataneous binary response models. The proposed estimation method is applied to estimate the income effect in a labor market participation problem using a large micro data set from the British FES. The semiparametric estimator is found to perform well, detecting a significant attenuation bias. The proposed estimator is contrasted to the corresponding Probit and Linear Probability specifications.

Type: Working / discussion paper
Title: Endogeneity in semiparametric binary response models
Open access status: An open access version is available from UCL Discovery
Language: English
Additional information: This is a revised version of the 2001 working paper. Please also see http://eprints.ucl.ac.uk/12620 and http://eprints.ucl.ac.uk/14714 for related items.
Keywords: JEL classification: C14, C25, C35, J22. Binary response, probit, endogeneity, semiparametric estimation.
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14735
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