qualitative-2&amp;3

# qualitative-2&amp;amp;3 - QUALITATIVE INFORMATION-2...

This preview shows pages 1–4. Sign up to view the full content.

QUALITATIVE INFORMATION QUALITATIVE INFORMATION - - 2 2 Linear Probability Models Linear Probability Models

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
y = { 0,1 } e.g . y = 1 if woman is in labour force y = 2 if woman is not in labour force p ( x ) = measures the change in the probability of a woman being in the labour force when x(j) increases by a unit, ceteris paribus . i.e. marginal effect of x(j) on Prob ( y | x ) 01 12 2 ... kk yx xx u β ββ =+ + + + + 10 1 1 2 2 [| , . . . ] . . . k E yx x x x x + + + 11 1 [ | ,... ] 0 ( 0| ) 1 ( 1| ) k E P r o by x x P r o =⋅ = + = 0 1 1 2 2 ( ) ( ) ... k k px x P r ob y x x x x x = == + + + + 1 (| , . . . ) k j j Prob y x x x =
Example: Pr ( in labour force ) = 0.58 – 0.0034 ( husband’s earning ) + 0.0038 ( educ ) (0.154) (0.0014) (0.007) + 0.0039 ( exper ) – 0.0006( exper-square ) – 0.016( age ) (0.006) (0.00018) (0.002) – 0.262(# kids < 6 years old ) + 0.013(# kids > 6 years old ) (0.034) (0.0132) n = 753; R-square = 0.264 Weakness (i) p ( x ) < 0, p ( x ) > 0, depending on the value of x . (ii) a probability cannot be linear to the independent variable for all possible values (i.e. LPM imposes constant marginal/partial effect). (iii) var [ y | x ] = p ( x )[1- p ( x ) ] ~ x violates MLR/5.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 08/27/2011 for the course ECON 7043 taught by Professor Projim during the Three '11 term at University of Adelaide.

### Page1 / 8

qualitative-2&amp;amp;3 - QUALITATIVE INFORMATION-2...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online