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Probit Models with Dummy Endogenous RegressorsJacob Nielsen ArendtDanish Institute of Governmental Research Holm Anders LarsenUniversity of Copenhagen February 2006 University of Southern Denmark Business and Economics Discussion Paper No. 4/2006 iHEA 2007 6th World Congress: Explorations in Health Economics Paper Abstract: 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, I18 working papers seriesDate posted: June 16, 2007 ; Last revised: May 15, 2008Suggested Citation |
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