A semiparametric model for binary response and continuous outcomes under index heteroscedasticity
This paper formulates a likelihood-based estimator for a double index, semiparametric binary response equation. A novel feature of this estimator is that it is based on density estimation under local smoothing. While the proofs differ from those based on alternative density estimators, the finite sample performance of the estimator is significantly improved. As binary responses often appear as endogenous regressors in continuous outcome equations, we also develop an optimal instrumental variables estimator in this context. For this purpose, we specialize the double index model for binary response to one with heteroscedasticity that depends on an index different from that underlying the mean-response". We show that such (multiplicative) heteroscedasticity, whose form is not parametrically specified, effectively induces exclusion restrictions on the outcomes equation. The estimator developed below exploits such identifying information. We provide simulation evidence on the favorable performance of the estimators and illustrate their use through an empirical application on the determinants, and affect, of attendance at a government financed school.
Year of publication: |
2006
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Authors: | Klein, Roger ; Vella, Francis |
Publisher: |
Bonn : Institute for the Study of Labor (IZA) |
Saved in:
freely available
Series: | IZA Discussion Papers ; 2383 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 534567258 [GVK] hdl:10419/33942 [Handle] |
Source: |
Persistent link: https://www.econbiz.de/10010269234
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