Testing identifying assumptions in bivariate probit models

B-Tier
Journal: Journal of Applied Econometrics
Year: 2023
Volume: 38
Issue: 3
Pages: 407-422

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper considers the bivariate probit model's identifying assumptions: linear index specification, joint normality of errors, instrument exogeneity, and relevance. First, we develop sharp testable equalities that detect all possible observable violations of the assumptions. Second, we propose an easy‐to‐implement testing procedure for the model's validity using existing inference methods for intersection bounds. The test achieves correct empirical size and performs well in detecting violations of the conditions in simulations. Finally, we provide a road map on what to do when the bivariate probit model is rejected, including novel bounds for the average treatment effect that relax the normality assumption.

Technical Details

RePEc Handle
repec:wly:japmet:v:38:y:2023:i:3:p:407-422
Journal Field
Econometrics
Author Count
3
Added to Database
2026-01-24