Department of Economics, University of Warwick,.pdfVIP

* A NOTE ON ESTIMATED COEFFICIENTS IN RANDOM EFFECTS PROBIT MODELS ** Wiji Arulampalam Department of Economics, University of Warwick, Coventry, CV4 7AL, U.K. email: wiji.arulampalam@warwick.ac.uk tel: (+44) (01203) 523471 fax: (+44) (01203) 523032 August, 1996. Revised October, 1998. Abstract: This note points out to applied researchers what adjustments are needed to the coefficient estimates in a random effects probit model in order to make valid comparisons in terms of coefficient estimates and marginal effects across different specifications. These adjustments are necessary because of the normalisation that is used by standard software in order to facilitate easy estimation of the random effects probit model. Keywords: Random effects probit. JEL Classification: C13, C23. * I should like to thank Alison Booth, Stephen Jenkins, Gordon Kemp and Chris Orme for helpful comments. ** nee Narendranathan. 1 I. INTRODUCTION Random effects (RE) probit models have recently become very popular due to the availability of data such as the British Household Panel Survey (Arulampalam and Booth (1998), Booth et al. (1996)). This model imposes the restriction that the correlation between successive error terms for th