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Estimation of an endogenous switching regression model with discrete dependent variables: Monte-Carlo analysis and empirical application of three estimators

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  • Ayal Kimhi

    (Department of Agricultural Economics and Management, Hebrew University, P.O. Box 12, Rehovot 76100, Israel)

Abstract

The performances of alternative two-stage estimators for the endogenous switching regression model with discrete dependent variables are compared, with regard to their usefulness as starting values for maximum likelihood estimation. This is especially important in the presence of large correlation coefficients, in which case maximum likelihood procedures have difficulties to converge. Monte-Carlo simulations indicate that an estimator that corrects for conditional heteroskedasticity of the residuals is superior in almost all instances, and especially when maximum likelihood is problematic. This result is also obtained in an empirical example in which off-farm work participation equations of farm women are conditional on farm work participation status.

Suggested Citation

  • Ayal Kimhi, 1999. "Estimation of an endogenous switching regression model with discrete dependent variables: Monte-Carlo analysis and empirical application of three estimators," Empirical Economics, Springer, vol. 24(2), pages 225-241.
    • Handle: RePEc:spr:empeco:v:24:y:1999:i:2:p:225-241
    Note: received: July 1995/final version received: March 1998
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    Cited by:

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    2. Steinbuks, J., 2008. "Financial constraints and firms' investment: results of a natural experiment measuring firm response to power interruption," Cambridge Working Papers in Economics 0844, Faculty of Economics, University of Cambridge.
    3. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," ZEW Discussion Papers 16-084, ZEW - Leibniz Centre for European Economic Research.
    4. Steinbuks Jevgenijs, 2012. "Firms' Investment under Financial and Infrastructure Constraints: Evidence from In-House Generation in Sub-Saharan Africa," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-34, October.
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    6. Li, Jinghan & Zepeda, Lydia & Gould, Brian W., 2007. "The Demand for Organic Food in the U.S.: An Empirical Assessment," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(3), pages 1-16.
    7. Benjamin, Catherine & Kimhi, Ayal, 2003. "Farm Work, Off-Farm Work, And Hired Farm Labor: Estimating A Discrete-Choice Model Of French Farm Couples' Labor Decisions," Discussion Papers 14990, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    8. Phiri, Isaac, 2020. "The effect of access to finance on commercialisation of smallholder maize farmers in Eswatini," Research Theses 334755, Collaborative Masters Program in Agricultural and Applied Economics.
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    More about this item

    Keywords

    Endogenous switching · discrete dependent variables · two-stage estimators · Monte-Carlo simulations · farm women's off-farm work participation;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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