A Two-Stage Estimator for Probit Models with Structural Group Effects

26 Pages Posted: 9 Jul 2000 Last revised: 28 May 2023

See all articles by George J. Borjas

George J. Borjas

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Glenn T. Sueyoshi

affiliation not provided to SSRN

Date Written: November 1993

Abstract

This paper outlines a two-stage technique for estimation and inference in probit models with structural group effects. The structural group specification belongs to a broader class of random components models. In particular, individuals in a given group share a common component in the specification of the conditional mean of a latent variable. For a number of computational reasons, existing random-effects models are impractical for estimation and inference in this type of problem. Our two-stage estimator provides an easily estimable alternative to the random effect specification. In addition, we conduct a Monte Carlo simulation comparing the performance of alternative estimators, and find that the two-stage estimator is superior -- both in terms of estimation and inference -- to traditional estimators.

Suggested Citation

Borjas, George J. and Sueyoshi, Glenn T., A Two-Stage Estimator for Probit Models with Structural Group Effects (November 1993). NBER Working Paper No. t0146, Available at SSRN: https://ssrn.com/abstract=225107

George J. Borjas (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER)

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Glenn T. Sueyoshi

affiliation not provided to SSRN

No Address Available