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A two-stage estimator for probit models with structural group effects

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  • Borjas, George J.
  • Sueyoshi, Glenn T.

Abstract

This paper outlines a two-stage technique for estimation and inference in probit models with structural group effects. The structural group specification belongs to a broader class of random components models. In particular, individuals in a given group share a common component in the specification of the conditional mean of a latent variable. For a number of computational reasons, existing random-effects models are impractical for estimation and inference in this type of problem. Our two-stage estimator provides an easily estimable alternative to the random effect specification. In addition, we conduct a Monte Carlo simulation comparing the performance of alternative estimators, and find that the two-stage estimator is superior -- both in terms of estimation and inference -- to traditional estimators.
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Suggested Citation

  • Borjas, George J. & Sueyoshi, Glenn T., 1994. "A two-stage estimator for probit models with structural group effects," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 165-182.
    • Handle: RePEc:eee:econom:v:64:y:1994:i:1-2:p:165-182
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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