Econometric Society 57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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THE IMPACT OF MEASUREMENT ERROR IN PROBIT MODELS OF BENEFIT TAKE-UP


Category: Econometrics
MEASUREMENT ERROR
Tuesday 27th August 2002, 09:30 - 11:00, Room: 5.2
Session Chair(s): Carsten Tanggaard, Aarhus School of Business, DENMARK

Presenter(s): Pudney, Steve

Co-Author(s): none

Keyword(s): benefit take-up, measurement error, probit

JEL(s): C25, H31

Abstract:

The probit model is widely used to analyse take-up behaviour by people eligible for social security benefits. In practice, observed income and simulated benefit entitlement are error-prone, leading to incorrect identification of eligible individuals and measurement error in the explanatory variables. We analyse the consequences in two cases: a simple model where takeup is perfectly observed but measured income is unreliable and a more complex model where both income and benefit receipt are error-prone. We find that applied results may be very sensitive to measurement error; that biases are qualitatively complicated and that small-ó approximations perform poorly.


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Paper Reference Number: 171

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57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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