Estimation based on the probit model, Microeconomics

Assignment Help:

Let {(yi; xi); 1 ≤ i ≤ n} be an i.i.d sequence of random variables where yi and xi satisfy the linear relationship yi = β0 + β1xi +i with Cov(xi;i) = 0 and yi {0, 1} (i.e. yi is a binary dependent variable).

(a) Describe the main limitations of estimating β1 via OLS.

(b) Describe an alternative approach to estimation based on the Probit Model. Note that I expect you to be able to formulate the likelihood function.


Related Discussions:- Estimation based on the probit model

Combined ppc, how do you create a combined ppc consisting of three people

how do you create a combined ppc consisting of three people

Choosing output in long run, Choosing Output in Long Run * In long run,...

Choosing Output in Long Run * In long run, a firm can change all its inputs, including size of the plant. * We are taking free entry and free exit. * Accounting

Product markets and production, Product Markets: Markets where produced ser...

Product Markets: Markets where produced services and goods are bought and sold (distinguished from markets for factors of production). Production: Process by which human labour

Economic applications project, Within analysis of perfect competition, we d...

Within analysis of perfect competition, we distinguish between the short run and the long run on the basis that use of some input factors is fixed in the short run, but variable in

Causes of inflation, Causes of inflation: Excessive growth in wages ...

Causes of inflation: Excessive growth in wages relative to productivity can cause inflationary pressures. This causes aggregate demand to increase relative to aggregate supp

Explain the roles of economics theory, Explain the roles of economics theor...

Explain the roles of economics theory. Roles of Economic Theory An economic theory has three probable roles: a. This can be used to describe economic behavior and economi

Moving average methods, Moving Average Methods: Under this methods the movi...

Moving Average Methods: Under this methods the moving average to the sales of the past years is computed. The computed moving average is taken as forecast for the next year or peri

Demand and price, examples of quantity demand when prices increase

examples of quantity demand when prices increase

ECON, why society has chosen the mixed economy

why society has chosen the mixed economy

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd