A Semiparametric Model for Binary Response and Continuous Outcomes Under Index Heteroscedasticity

Roger Klein () and Francis Vella

No 2383, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper formulates a likelihood-based estimator for a double index, semiparametric binary response equation. A novel feature of this estimator is that it is based on density estimation under local smoothing. While the proofs differ from those based on alternative density estimators, the finite sample performance of the estimator is significantly improved. As binary responses often appear as endogenous regressors in continuous outcome equations, we also develop an optimal instrumental variables estimator in this context. For this purpose, we specialize the double index model for binary response to one with heteroscedasticity that depends on an index different from that underlying the “mean-response”. We show that such (multiplicative) heteroscedasticity, whose form is not parametrically specified, effectively induces exclusion restrictions on the outcomes equation. The estimator developed below exploits such identifying information. We provide simulation evidence on the favorable performance of the estimators and illustrate their use through an empirical application on the determinants, and affect, of attendance at a government financed school.

Keywords: heteroscedasticity; semiparametric; binary response; endogenous treatment (search for similar items in EconPapers)
JEL-codes: C14 C35 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2006-10
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Journal of Applied Econometrics, 2009, 24 (5), 735–762

Downloads: (external link)
https://docs.iza.org/dp2383.pdf (application/pdf)

Related works:
Journal Article: A semiparametric model for binary response and continuous outcomes under index heteroscedasticity (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp2383

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().