Estimation Of The Logit Model

For estimation purposes, we write (15.5.6) as follows:

We will discuss the properties of the stochastic error term ui shortly.

To estimate (15.6.1), we need, apart from Xi, the values of the regressand, or logit, Li. This depends on the type of data we have for analysis. We distinguish two types of data: (1) data at the individual, or micro, level, and (2) grouped or replicated data.

Data at the Individual Level

If we have data on individual families, as in the case of Table 15.1, OLS estimation of (15.6.1) is infeasible. This is easy to see. In terms of the data given in Table 15.1, Pi = 1 if a family owns a house and Pi = 0 if it does not own a house. But if we put these values directly into the logit Li, we obtain:

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