Efficient estimation of limited dependent variable models with endogenous explanatory variables |
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Institution: | 1. Department of Economics, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA;2. Department of Mathematics and Computer Science, Marburg University, Hans-Meerweinstr., 35032 Marburg, Germany;3. Institute for Mathematics, University of Rostock, 18051 Rostock, Germany |
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Abstract: | This paper discusses asymptotically efficient estimation of the parameters of limited dependent variable models with endogenous explanatory variables. General results on asymptotic efficiency of two-stage and Amemiya GLS estimators are derived and used to obtain a simple, asymptotically efficient estimator of the structural coefficients. This estimator can be calculated by applying GLS to estimates of the reduced form coefficients that are obtained by using reduced form residuals as additional explanatory variables. It is also shown that it is possible to obtain asymptotically efficient estimators of the other coefficients by a modified minimum chi-square method. |
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