The Effect of Misclassifications in Probit Models: Monte Carlo Simulations and Applications

Abstract

The increased use of models with limited-dependent variables has allowed researchers to test important relationships in political science. Often, however, researchers employing such models fail to acknowledge that the violation of some basic assumptions has in part difference consequences in nonlinear models than in linear ones. In this paper, I demonstrate this for binary probit models in which the dependent variable is systematically miscoded. Contrary to the linear model, such misclassifications affect not only the estimate of the intercept but also those of the other coefficients. In a Monte Carlo simulation, I demonstrate that a model proposed by Hausman, Abrevaya, and Scott-Morton (1998, Misclassification of the dependent variable in a discrete-response setting.Journal of Econometrics87:239–69) allows for correcting these biases in binary probit models. Empirical examples based on reanalyses of models explaining the occurrence of rebellions and civil wars demonstrate the problem that comes from neglecting these misclassifications.