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Endogeneity in semiparametric binary response models

Richard Blundell () and James L. Powell ()
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James L. Powell: Institute for Fiscal Studies and University of California, Berkeley

No CWP05/01, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: This paper develops and implements semiparametric methods for estimating binary response (binary choice) models withcontinuous endogenous regressors. It extends the existing literature on semiparametric estimation in single index binary response models to the case of endogenous regressors. It develops a control function approach to accounting for endogeneity in triangular and fully simulataneous binary response models. An application is given to the case of estimating the income effect in a labor market participation problem using a large micro data set from the British FES. The semiparametric estimator is found to perform well detecting a significant attenuation bias. The proposed estimator is contrasted to the corresponding Probit and Linear Probability specifications.

JEL-codes: C14 C25 C35 J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm
Date: 2001-07-01
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