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Econometrics 2016, 4(2), 26; doi:10.3390/econometrics4020026

Removing Specification Errors from the Usual Formulation of Binary Choice Models

1
Federal Reserve Board (Retired), Washington, DC 20551, USA
2
Department of Mathematics (Retired), American University, Washington, DC 20016, USA
3
Department of Mathematics (Retired), Temple University, Philadelphia, PA 19122, USA
4
Department of Economics, New York University, 44 West Fourth Street, 7-90 New York, NY 10012, USA
5
Leicester University, Room Astley Clarke 116, University Road, Leicester LEI 7RH, UK
6
Bank of Greece, 21 El. Venizelos Ave., 10250 Athens, Greece
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Monetary Policy Council, Bank of Greece, 21 El. Venizelos Ave., Athens 10250, Greece
Current Address: 6333 Brocketts Crossing, Kingstowne, VA 22315, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Kerry Patterson
Received: 22 December 2015 / Revised: 19 April 2016 / Accepted: 19 May 2016 / Published: 3 June 2016
(This article belongs to the Special Issue Discrete Choice Modeling)
View Full-Text   |   Download PDF [779 KB, uploaded 3 June 2016]   |  

Abstract

We develop a procedure for removing four major specification errors from the usual formulation of binary choice models. The model that results from this procedure is different from the conventional probit and logit models. This difference arises as a direct consequence of our relaxation of the usual assumption that omitted regressors constituting the error term of a latent linear regression model do not introduce omitted regressor biases into the coefficients of the included regressors. View Full-Text
Keywords: binary choice models; specification errors; stochastic coefficients binary choice models; specification errors; stochastic coefficients
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Swamy, P.; Chang, I.-L.; Mehta, J.S.; Greene, W.H.; Hall, S.G.; Tavlas, G.S. Removing Specification Errors from the Usual Formulation of Binary Choice Models. Econometrics 2016, 4, 26.

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