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Estimation of Limited Dependent Variable Models With Dummy Endogenous Regressors

Estimation of Limited Dependent Variable Models With Dummy Endogenous Regressors Applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes. I argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters, such as index coefcients, instead of causal effects. Once the object of estimation is taken to be the causal effect of treatment, several simple strategies are available. These include conventional two-stage least squares, multiplicative models for conditional means, linear approximation of nonlinear causal models, models for distribution effects, and quantile regression with an endogenous binary regressor. The estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business & Economic Statistics Taylor & Francis

Estimation of Limited Dependent Variable Models With Dummy Endogenous Regressors

Journal of Business & Economic Statistics , Volume 19 (1): 27 – Jan 1, 2001
27 pages

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References (99)

Publisher
Taylor & Francis
Copyright
© American Statistical Association
ISSN
1537-2707
eISSN
0735-0015
DOI
10.1198/07350010152472571
Publisher site
See Article on Publisher Site

Abstract

Applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes. I argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters, such as index coefcients, instead of causal effects. Once the object of estimation is taken to be the causal effect of treatment, several simple strategies are available. These include conventional two-stage least squares, multiplicative models for conditional means, linear approximation of nonlinear causal models, models for distribution effects, and quantile regression with an endogenous binary regressor. The estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work.

Journal

Journal of Business & Economic StatisticsTaylor & Francis

Published: Jan 1, 2001

Keywords: Instrumental variables; Labor supply; Sample selection; Semiparametric methods; Tobit

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