Endogenous variables in non-linear models with mixed effects: Inconsistence under perfect identification conditions?

Franz Buscha () and Anna Conte

No 2013-027, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: This paper examines the consequences of introducing a normally distributed effect into a system where the dependent variable is ordered and the explanatory variable is ordered and endogenous. Using simulation techniques we show that a naïve bivariate ordered probit estimator which fails to take a mixed effect into account will result in inconsistent estimates even when identification conditions are optimal. Our results suggest this finding only applies to non-linear endogenous systems.

Keywords: bivariate probit; bivariate ordered probit; mixed effects; endogenous binary variables; constant parameters (search for similar items in EconPapers)
JEL-codes: C35 C36 C51 (search for similar items in EconPapers)
Date: 2013-07-01
New Economics Papers: this item is included in nep-dcm and nep-ecm
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