Developing Consistent Marginal Effect Estimates in a Simultaneous Equation Model with Limited Dependent Variables

Joseph A. Atwood, Alison Bittinger and Vincent H. Smith

No 146790, Staff Papers from University of Minnesota, Department of Applied Economics

Abstract: We demonstrate that Theil-type variance corrections are required to obtain consistent marginal effect estimates in Nelson-Olsen's two-stage limited dependent variable (2SLDV) model. As Theil's residuals-based corrections are infeasible with 2SLDV, we present variance correction procedures shown to be virtually equivalent to Theil’s 2SLS corrections for continuous models but that are implementable in 2SLDV models. Simulations demonstrate that the proposed variance correction procedures generate consistent marginal effect estimates. The effects of the correction procedures are illustrated in a study of technology adoption by Ethiopian farmers. Components of the variance correction procedures should prove useful in other applications involving limited dependent variables.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 40
Date: 2013-03
New Economics Papers: this item is included in nep-dcm and nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umaesp:146790

DOI: 10.22004/ag.econ.146790

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