This paper develops and implements semiparametric methods for estimating binary response (binary choice) models with continuous endogenous regressors. It extends existing results on semiparametric estimation in single index binary response models to the case of endogenous regressors. It develops a control function approach to account for endogeneity in triangular and fully simulataneous binary response models. The proposed estimation method is applied to estimate the income effect in a labor market participation problem using a large micro data set from the British FES. The semiparametric estimator is found to perform well, detecting a significant attenuation bias. The proposed estimator is contrasted to the corresponding Probit and Linear Probability specifications.
Authors
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Journal article details
- Publisher
- Oxford University Press
- Issue
- Volume 71, No. 3, July 2004, pages 655-679
Suggested citation
Blundell, R. (2004). 'Endogeneity in Semiparametric Binary Response Models' 71, No. 3(2004), pp.655–679.
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