[Limdep Nlogit List] bivariate probit

Dr. Anat Tchetchik manes at agri.huji.ac.il
Mon Nov 5 19:45:56 EST 2007


Fred,

Thanks very much for your answer, can you please refer me to the
documentation you have mentioned in your answer?(regarding using a larger
value)

Anat  
-----Original Message-----
From: limdep-bounces at limdep.itls.usyd.edu.au
[mailto:limdep-bounces at limdep.itls.usyd.edu.au] On Behalf Of Fred Feinberg
Sent: Sunday, November 04, 2007 6:38 PM
To: Limdep and Nlogit Mailing List
Subject: Re: [Limdep Nlogit List] bivariate probit

You *could* report the results, but probably shouldn't. Rho up near 0.99
almost
certainly indicated one of three things: (1) an important omitted variable;
(2)
a model misspecification; (3) a flat-out error.

It is very unlikely that the fit at 0.99 is a true maximum. It may be a
holdover
from the estimation's approximation method, which I believe is either some
form
of quadrature or quasi-Monte-Carlo. Those methods work well IF enough
estimation
points are used. Have you tried using a larger value? You may discover that
your
0.99 value changes. [See the documentation for how to do this.]

A telltale sign is that the *substantive* results -- particularly the size
of
Rho -- change radically when any variables are subtracted. It's actually
more
common to have Rho go up when you leave out a variable, because that
variable is
now unavailable to 'remove' its effects from the model's two equations,
whose
error would then be more correlated. Of course, taking out a variable can
increase the overall error in the model, so Rho can go down, too; but this
is
less common.

I'm curiour what Prof. Greene might say, but my own experience with
Heckman-type
models indicates that this particular solution probably isn't an accurate
representation of what's going on in your data.

Fred

=====

Fred Feinberg
Hallman Fellow and Professor of Management
Stephen M. Ross School of Business
University of Michigan
feinf at umich.edu

"Dr. Anat Tchetchik" wrote:

> We are running via  NLOGIT a bivariate probit with selection (which  uses
> the atanh(rho) during estimation) and keep receiving very high and
> significant Rho (0.99 but never 1), The model results, other than that,
are
> reasonable and fit our expectations.  when we omit variables from the
model,
> rho decreases substantially and become insignificant.  Can we report our
> results with such rho?
> Thanks,
> Anat Tchetchik, Ph.D.
> The Department of Agricultural Economics
> The Hebrew University of Jerusalem
> Tel: 08-9489231
> cell: 054-4928740
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