A Note on Additive Separability and Latent Index Models of Binary Choice: Representation Results

4 Pages Posted: 27 Jul 2006

See all articles by Edward Vytlacil

Edward Vytlacil

Yale University - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

The standard binary choice model in econometrics has the choice determined by a latent index crossing a threshold. The latent index is almost always assumed to be additively separable in observable and unobservable regressors, and most commonly linear in all regressors. This note provides a class of non-separable latent index functions which will have equivalent representations as additively separable or linear index functions. These results demonstrate that assuming a linear or additively separable latent index function is less restrictive than previously recognized.

Suggested Citation

Vytlacil, Edward J., A Note on Additive Separability and Latent Index Models of Binary Choice: Representation Results. Oxford Bulletin of Economics and Statistics, Vol. 68, No. 4, pp. 515-518, August 2006. Available at SSRN: https://ssrn.com/abstract=920954 or http://dx.doi.org/10.1111/j.1468-0084.2006.00175.x

Edward J. Vytlacil (Contact Author)

Yale University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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