Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 440: Endogeneity in a Binomial Model

Kurt Brännäs () and Maria Eriksson ()
Additional contact information
Kurt Brännäs: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Maria Eriksson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: A characterization of endogeneity in the binomial regression model is given. The relationship to a model subject to selection is indicated. Maximum likelihood and nonlinear instrumental variable estimators are obtained and evaluated in a Monte Carlo study. A new LM test and a Hausman test against endogeneity are also evaluated. Maximum likelihood estimation based on an instrumental variable and the LM test are found to perform well. An illustration based on choice set sizes for Swedish unemployed is included.

Keywords: Binomial; Endogeneity; Choice Set; Unemployment; Test.

JEL-codes: C12; C13; C21; C25

11 pages, December 15, 1997

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