Abstract
In labor economics, one is faced with explaining the decision to participate in the labor force, the decision to join a union, or the decision to migrate from one region to the other. In all these cases, the dependent variable is a dummy variable with values 1 if the worker participates and 0 if he or she does not participate. We dealt with dummy variables as explanatory variables on the right hand side of the regression, but what additional problems arise when this dummy variable appears on the left hand side of the equation? As we have done in previous chapters, we first study its effects on the usual least squares estimator, and then consider alternative estimators that are more appropriate for models of this nature.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
This chapter is based on the material in Hanushek and Jackson (1977), Maddala (1983), Davidson and MacKinnon (1993) and Greene (1993). Additional references include:
Amemiya, T. (1981), “Qualitative Response Models: A Survey,” Journal of Economic Literature, 19: 1481-1536.
Amemiya, T. (1984), “Tobit Models: A Survey,” Journal of Econometrics, 24: 3–61.
Bera, A.K., C. Jarque and L.F. Lee (1984), “Testing the Normality Assumption in Limited Dependent Variable Models,” International Economic Review, 25: 563–578.
Berndt, E., B. Hall, R. Hall and J. Hausman (1974), “Estimation and Inference in Nonlinear Structural Models,” Annals of Economic and Social Measurement, 3 /4: 653–665.
Boskin, M. (1974), “A Conditional Logit Model of Occupational Choice,” Journal of Political Economy, 82: 389–398.
Cornwell, C. and P. Rupert (1988), “Efficient Estimation with Panel Data: An Empirical Comparison of Instrumental Variables Estimators,” Journal of Applied Econometrics, 3: 149–155.
Cox, D.R. (1970), The Analysis of Binary Data ( Chapman and Hall: London).
Cragg, J. and R. Uhler (1970), “The Demand for Automobiles,” Canadian Journal of Economics, 3: 386–406.
Davidson, R. and J. MacKinnon (1984), “Convenient Specification Tests for Logit and Probit Models,” Journal of Econometrics, 25: 241–262.
Dempster, A., N. Laird and D. Rubin (1977), “Maximum Likelihood Estimation from Incomplete Data via the EM Algorithm,” Journal of the Royal Statistical Society, Series B, 39: 1–38.
Dhillon, U.S., J.D. Shilling and C.F. Sirmans (1987), “Choosing Between Fixed and Adjustable Rate Mortgages,” Journal of Money, Credit and Banking, 19: 260–267.
Effron, B. (1978), “Regression and ANOVA with Zero-One Data: Measures of Residual Variation,” Journal of the American Statistical Association, 73: 113–121.
Fair, R. (1977), “A Note on the Computation of the Tobit Estimator,” Econometrica, 45: 1723–1727.
Goldberger, A. (1964), Econometric Theory ( Wiley: New York).
Hanushek, E.A. and J.E. Jackson (1977), Statistical Methods for Social Scientists (Academic Press: New York). Hausman, J. and D. McFadden (1984), “A Specification Test for Multinomial Logit Model,” Econometrica, 52: 1219–1240.
Hausman, J.A. and D.A. Wise (1977), “Social Experimentation, Truncated Distributions, and Efficient Estimation,” Econometrica, 45: 919–938.
Heckman, J. (1976), “The Common Structure of Statistical Models of Truncation, Sample Selection, and Limited Dependent Variables and a Simple Estimator for Such Models,” Annals of Economic and Social Measurement, 5: 475–492.
Heckman, J. (1979), “Sample Selection Bias as a Specification Error,” Econometrica, 47: 153–161.
Lee, L.F. and G.S. Maddala (1985), “The Common Structure of Tests for Selectivity Bias, Serial Correlation
Heteroskedasticity and Non-Normality in the Tobit Model,“ International Economic Review,26: 1–20. Lott, W.F. and S.C. Ray (1992), Applied Econometrics: Problems with Data Sets (The Dryden Press: NewYork).
Maddala, G. (1983), Limited Dependent and Qualitative Variables in Econometrics ( Cambridge University Press: Cambridge).
McFadden, D. (1974), “The Measurement of Urban Travel Demand,” Journal of Public Economics, 3: 303–328.
Pagan, A.R. and F. Vella (1980), “Diagnostic Tests for Models Based on Individual Data: A Survey,” Journal of Applied Econometrics, 4: S29 - S59.
Powell, J. (1984), “Least Absolute Deviations Estimation of the Censored Regression Model,” Journal of Econometrics, 25: 303–325.
Powell, J. (1986), “Symmetrically Trimmed Least Squares Estimation for Tobit Models,” Econometrica, 54: 1435–1460.
Pratt, J.W. (1981), “Concavity of the Log-Likelihood,” Journal of the American Statistical Association, 76: 103-109.
Schmidt, P. and R. Strauss (1975), “Estimation of Models With Jointly Dependent Qualitative Variables: A Simultaneous Logit Approach,” Econometrica, 43: 745–755.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 1998 Springer-Verlag Berlin · Heidelberg
About this chapter
Cite this chapter
Baltagi, B.H. (1998). Limited Dependent Variables. In: Econometrics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-00516-3_13
Download citation
DOI: https://doi.org/10.1007/978-3-662-00516-3_13
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-63617-5
Online ISBN: 978-3-662-00516-3
eBook Packages: Springer Book Archive