A note on the different interpretation of the correlation parameters in the Bivariate Probit and the Recursive Bivariate Probit

C-Tier
Journal: Economics Letters
Year: 2018
Volume: 167
Issue: C
Pages: 104-107

Score contribution per author:

0.251 = (α=2.01 / 4 authors) × 0.5x C-tier

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

Abstract

This note shows that, if a Bivariate Probit (BP) model is estimated on data arising from a Recursive Bivariate Probit (RBP) process, the resulting BP correlation parameter is a weighted average of the RBP correlation parameter and the parameter associated to the endogenous binary variable. Two corollaries follow this proposition: i) the interpretation of the correlation parameter in the RBP is not the same as in the BP —i.e. the RBP correlation parameter does not necessarily reflect the correlation between the binary variables under study; and ii) a zero correlation parameter in a BP model, usually interpreted as evidence of independence between the binary variables under study, may actually mask the presence of an RBP process.

Technical Details

RePEc Handle
repec:eee:ecolet:v:167:y:2018:i:c:p:104-107
Journal Field
General
Author Count
4
Added to Database
2026-01-25