Testing Exogeneity in the Bivariate Probit Model: A Monte Carlo Study

22 Pages Posted: 28 Feb 2006

See all articles by Chiara Monfardini

Chiara Monfardini

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Rosalba Radice

University of Bologna - Department of Statistics

Date Written: March 10, 2006

Abstract

We conduct an extensive Monte Carlo experiment to examine the finite samples properties of maximum likelihood based inference in the bivariate probit model with endogenous dummy. We analyse the relative performance of alternative exogeneity tests, the impact of distributional misspecification and the role of exclusion restrictions to achieve parameter identification in practice. The results of our investigation allow us to draw some important guidelines for the applied econometric practice.

Keywords: Bivariate probit model, endogenous dummy, exogeneity testing

JEL Classification: C15, C35, C52

Suggested Citation

Monfardini, Chiara and Radice, Rosalba, Testing Exogeneity in the Bivariate Probit Model: A Monte Carlo Study (March 10, 2006). Available at SSRN: https://ssrn.com/abstract=886506 or http://dx.doi.org/10.2139/ssrn.886506

Chiara Monfardini (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
0039 51 2098148 (Phone)
0039 51 221968 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Rosalba Radice

University of Bologna - Department of Statistics ( email )

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Bologna, Bo 40126
Italy
+393474257043 (Phone)