Coherence and Completeness of Structural Models Containing a Dummy Endogenous Variable

Arthur Lewbel

No 456, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Let y be a vector endogenous variables and let w be a vector of covariates, parameters and errors or unobservables that together are assumed to determine y. A structural model y=H(y,w) is complete and coherent if it has a well defined reduced form, meaning that for any value of w there exists a unique value for y. Coherence and completeness simplifies identification, and is required for many estimators and many model applications. Incoherency or incompleteness can arise in models with multiple decision makers such as games, or when the decision making of individuals is either incorrectly or incompletely specified. This paper provides necessary and sufficient conditions for the coherence and completeness of simultaneous equation systems where one equation is a binomial response. Examples are dummy endogenous regressor models, regime switching regressions, treatment response models, sample selection models, endogenous choice systems, and determining if a pair of binary choices are substitutes or complements.

Keywords: binary choice; binomial response; simultaneous equations; endogeneity; coherency; latent variable models (search for similar items in EconPapers)
Pages: 17 pages
Date: 1997-09-15, Revised 2006-09-04
New Economics Papers: this item is included in nep-ecm
Note: Previously circulated as "Coherence of Structural Models Containing a Dummy Endogenous Variable"
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: COHERENCY AND COMPLETENESS OF STRUCTURAL MODELS CONTAINING A DUMMY ENDOGENOUS VARIABLE (2007)
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