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## Misclassification of the dependent variable in binary choice models

Survey data are often subject to a number of measurement errors. The measurement error associated with a multinomial variable is called a misclassification error. In this dissertation we study such errors when the outcome is binary. It is known that ignoring such misclassification errors may affect the parameter estimates, see for example Hausman, Abrevaya and Scott-Morton (1998). However, previous studies showed that robust estimation of the parameters is achievable if we take misclassification into account. There are many attempts to do so in the literature and the major problem in implementing them is to avoid poor or fragile identifiability of the misclassification probabilities. Generally we restrict these parameters by imposing prior information on them. Such prior constraints on the parameters are simple to impose within a Bayesian framework. Hence we consider a Bayesian logistic regression model that takes into account the misclassification of the dependent variable. A very convenient way to implement such a Bayesian analysis is to estimate the hierarchical model using the WinBUGS software package developed by the MRC biostatistics group, Institute of Public Health, at Cambridge University. WinGUGS allows us to estimate the posterior distributions of all the parameters using relatively little programming and once the program is written it is trivial to change the link function, for example from logit to probit. If we wish to have more control over the sampling scheme or to deal with more complex models, then we propose a data augmentation approach using the Metropolis-Hastings algorithm within a Gibbs sampling framework. The sampling scheme can be made more efficient by using a one-step Newton-Raphson algorithm to form the Metropolis-Hastings proposal. Results from empirically analyzing real data and from the simulation studies suggest that if suitable priors are specified for the misclassification parameters and the regression parameters, then logistic regression allowing for misclassification results in better estimators than the estimators that do not take misclassification into account.

Identifer | oai:union.ndltd.org:ADTP/234782 |

Date | January 2006 |

Creators | Gu, Yuanyuan, Economics, Australian School of Business, UNSW |

Publisher | Awarded by:University of New South Wales. Economics |

Source Sets | Australiasian Digital Theses Program |

Language | English |

Detected Language | English |

Rights | Copyright Yuanyuan Gu, http://unsworks.unsw.edu.au/copyright |

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