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

Edward Vytlacil

Oxford Bulletin of Economics and Statistics, 2006, vol. 68, issue 4, 515-518

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.

Date: 2006
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