On a General Computer Algorithm for the Analysis of Models with Limited Dependent Variables
Several econometric models for the analysis of relationships with limited dependent variables have been proposed, including the probit, Tobit, two-limit probit, ordered discrete, and friction models. Widespread application of these methods has been hampered by the lack of suitable computer programs. This paper provides a concise survey of the various models; suggests a general functional model under which they may be formulated and analyzed; reviews the analytic problems and the similarities and dissimilarities of the models; and outlines the appropriate and necessary methods of analysis including, but not limited to, estimation. It is thus intended to serve as a guide for users of the various models, for the preparation of suitable computer programs, for the users of those programs; and, more specifically, for the users of the program package utilizing the functional model as implemented on the NBER TROLL system.
Research supported in part by National Science Foundation Grant GJ-115X3 to the National Bureau of Economic Research, Inc. The author is indebted to Professor G.S. Maddala for his generous counsel in the preparation of this paper.
(Published as "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables") International Economic Review, Vol. 19, no. 3 (1978): 695-710.