Performance Of various estimators for censored response models with endogenous regressors

Changhui Kang, Myoung Jae Lee

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

The paper reviews four approaches (substitution (SUB), control function (CF), system reduced form (SRF) and artificial instrumental regressor (AIR)) dealing with endogenous regressors in censored response models, and compares them through a simulation. Based on mean-squared-error type criteria, CF and AIR perform better than SUB and SRF; in terms of computation, however, SUB and CF are the easiest, closely followed by SRF. Although CF does well in both accounts, its assumptions are restrictive, and CF provides very different results from the other estimators when a real data set is used. Therefore, although the choice of an estimator among the four should be case-specific, for practitioners, we would recommend SUB.

Original languageEnglish
Pages (from-to)447-463
Number of pages17
JournalPacific Economic Review
Volume15
Issue number4
DOIs
Publication statusPublished - 2010 Oct

ASJC Scopus subject areas

  • Economics and Econometrics

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