Binary Choice Model with Interactive Effects
Economic Modelling
Sen Xue, Thomas Tao Yang, Qiankun Zhou
Abstract
This paper considers the estimation of binary choice model with interactive effects. We propose an estimator via combining the projection method (Mundlak, 1978) and the special regressor method (Lewbel, 2000a). The proposed estimator requires mild distribution assumptions on unobservables. The asymptotic property of this estimator is established. Our estimator performs well in Monte Carlo simulations. We apply this estimator to study migration intention of rural residents in China. The results suggest that numbers of co-habiting children and elderly are negatively correlated with migration intention.
Keywords: Binary choice model; Interactive effects; Projection method; Partition regression; Special regressor
JEL classification: C01; C35; C38
