On Liu estimators for the logit regression model

Kristofer Månsson (), B.M. Golam Kibria and Ghazi Shukur

Economic Modelling, 2012, vol. 29, issue 4, 1483-1488

Abstract: This paper introduces a shrinkage estimator for the logit model which is a generalization of the estimator proposed by Liu (1993) for the linear regression. This new estimation method is suggested since the mean squared error (MSE) of the commonly used maximum likelihood (ML) method becomes inflated when the explanatory variables of the regression model are highly correlated. Using MSE, the optimal value of the shrinkage parameter is derived and some methods of estimating it are proposed. It is shown by means of Monte Carlo simulations that the estimated MSE and mean absolute error (MAE) are lower for the proposed Liu estimator than those of the ML in the presence of multicollinearity. Finally the benefit of the Lie estimator is shown in an empirical application where different economic factors are used to explain the probability that municipalities have net increase of inhabitants.

Keywords: Estimation; MAE; MSE; Multicollinearity; Logit; Liu; Simulation (search for similar items in EconPapers)
Date: 2012
References: View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: On Liu Estimators for the Logit Regression Model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:4:p:1483-1488

DOI: 10.1016/j.econmod.2011.11.015

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