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AN EXCLUSIVE REGRESSORS BINARY MIXTURE MODEL WITH AN APPLICATION TO LABOUR SUPPLY
Author(s) -
Lu ZengHua,
Brown Bruce M.
Publication year - 2006
Publication title -
australian and new zealand journal of statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.434
H-Index - 41
eISSN - 1467-842X
pISSN - 1369-1473
DOI - 10.1111/j.1467-842x.2006.00443.x
Subject(s) - mathematics , unobservable , econometrics , mixture model , estimator , covariance , logistic regression , covariance matrix , binary number , statistics , component (thermodynamics) , arithmetic , physics , thermodynamics
Summary This paper suggests a new type of mixture regression model, in which each mixture component is explained by its own regressors. Thus, the dependent variable can be driven by one of several unobservable explanatory mechanisms, each of which has its own distinct variables. An extension of the simulated annealing algorithm is introduced to fit this general mixture model. The paper also suggests a new technique for estimating the covariance matrix of estimators in a mixture model. Finally, empirical studies of a labour supply example show that our proposed model can perform much better than conventional logistic or mixture models.