Probit Models with Binary Endogenous Regressors

Jacob Nielsen Arendt () and Anders Holm ()

No 2006-06, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: Sample selection and endogeneity are frequent causes of biases in non-experimental empirical studies. In binary models a standard solution involves complex multivariate models. A simple approximation has been shown to work well in bivariate models. This paper extends the approximation to a trivariate model. Simulations show that the approximation outperforms full maximum likelihood while a least squares approximation may be severely biased. The methods are used to estimate the influence of trust in the parliament and politicians on voting- propensity. No previous studies have allowed for endogeneity of trust on voting and it is shown to severely affect the results.

Keywords: endogeneity; multivariate probit; approximation; Monte Carlo simulation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-ecm and nep-pol
Date: 2006-02
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