Linear probability model: Difference between revisions

Revision as of 16:38, 8 February 2023

Revision as of 14:23, 20 August 2023

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==Latent-variable formulation==

More formally, the LPM can arise from a latent-variable formulation (usually to be found in the econometrics literature, <ref name=Amemiya>{{cite journal |last=Amemiya |first=Takeshi |year=1981 |title=Qualitative Response Models: A Survey|journal=Journal of Economic Literature |volume =19 |number =4 |pages=1483–1536 }}</ref>), as follows: assume the following regression model with a latent (unobservable) dependent variable:

: <math>y^* = b_0+ \mathbf x'\mathbf b + \varepsilon,\;\; \varepsilon\mid \mathbf x\sim U(-a,a).</math>