Probit Models with Dummy Endogenous Regressors
Jacob Nielsen Arendt
Danish Institute of Governmental Research (KORA)
Holm Anders Larsen
University of Copenhagen
University of Southern Denmark Business and Economics Discussion Paper No. 4/2006
iHEA 2007 6th World Congress: Explorations in Health Economics Paper
This study considers heckit-type approximations useful for a number of different trivariate probit models. They are simple to use and have no convergence problems like full maximum likelihood. Simulations show that a heckit and a least squares approximation perform as well as the trivariate probit estimator in small samples when the degree of endogeneity is not too severe. A simple double-heckit and a heteroskedasticity corrected heckit approximation seem particularly robust and promising for testing exogeneity. The methods are used to estimate the impact of physician advice on physical activity, where the heckit approximations work as well as full maximum likelihood.
Number of Pages in PDF File: 30
Keywords: Multivariate Probit, Two-step estimation, Endogeneity, Selection, Medical advice
JEL Classification: C25, C35, I12, I18working papers series
Date posted: June 16, 2007 ; Last revised: May 15, 2008
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