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Bivariate Probit and Logit Models

The document discusses bivariate probit and logit models, including their equations, coefficients, marginal effects, and examples of bivariate outcomes. It also provides the specification of the bivariate probit model, explaining the latent variables, outcomes, and how to estimate marginal effects and predicted values.

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Nchimunya Alik Chompolola
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75 views4 pages

Bivariate Probit and Logit Models

The document discusses bivariate probit and logit models, including their equations, coefficients, marginal effects, and examples of bivariate outcomes. It also provides the specification of the bivariate probit model, explaining the latent variables, outcomes, and how to estimate marginal effects and predicted values.

Uploaded by

Nchimunya Alik Chompolola
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Bivariate Probit and Logit Models

Ani Katchova

© 2013 by Ani Katchova. All rights reserved.


Bivariate Probit and Logit Models Overview

 Bivariate probit and logit models equations


 Coefficients and marginal effects

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Bivariate probit model

Bivariate outcome examples

 Individual decision whether to work or not and whether to have children or not.
 Farmer decision of whether to use marketing contracts or not and whether to use
environmental contracts or not.
 The bivariate models estimates decisions that are interrelated as opposed to independent.

Bivariate probit model specification

 The bivariate probit model is a joint model for two binary outcomes.
 These outcomes may be correlated, with correlation .
 If the correlation turns out insignificant, then we can estimate two separate probit models,
otherwise we have to use a bivariate probit model.
 The unobserved latent variables are presented as:

y∗ ′

y∗ ′

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 The bivariate probit model specifies the outcomes as:

1 y ∗ 0
0 y ∗ 0

1 y ∗ 0
0 y ∗ 0

 Marginal effects and predicted values can be estimated similarly to those for the binary probit
models. Marginal effects for the joint probability, say P(y1=1 and y2=1) are also available.

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