Estimation in a Class of Simultaneous Equation Limited Dependent Variable Models

Estimation of simultaneous-equation, limited dependent variable models is considered. The minimum Chi-squared method is used to compare the asymptotic relative efficiency of marginal and new conditional maximum likelihood estimators for this class of models. Efficient minimum Chi-squared estimation procedures are described. A two-step algorithm, based on a conditional maximum likelihood estimator, provides a natural framework for both computing a linearized and locating the joint maximum likelihood estimator. The unimodality of the simultaneous-equation, tobit likelihood function is proved and this model is used to illustrate the empirical application of some of the estimators considered in the paper. Copyright 1989 by The Review of Economic Studies Limited.