Simultaneously incomplete and incoherent (SII) dynamic LDV models: with an application to financing constraints and firms’ decision to innovate
Vassilis Hajivassiliou and
Frédérique Savignac
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Abstract:
We develop novel methods for establishing coherency and completeness conditions in Static and Dynamic Limited Dependent Variables (LDV) Models. We characterize the two distinct problems as “empty-region ”incoherency and “overlap-region” incoherency or incompleteness and show that the two properties can co-exist. We focus on the class of models that can be Simultaneously Incomplete and Incoherent (SII). We propose estimation strategies based on Conditional Maximum Likelihood Estimation (CMLE) for simultaneous dynamic LDV models without imposing recursivity. Point identification is achieved through sign-restrictions on parameters or other prior assumptions that complete the underlying data process. Using as modelling framework the Panel Bivariate Probit model with State Dependence, we analyse the impact of financing constraints on innovation: ceteris paribus, a firm facing binding finance constraints is substantially less likely to undertake innovation, while the probability that a firm encounters a binding finance constraint more than doubles if the firm is innovative. In addition, a strong role for state dependence in dynamic versions of our models is established.
Keywords: financing constraints; innovation; dynamic limited dependent variable models; joint bivariate probit model; econometric coherency and completeness conditions; state dependence (search for similar items in EconPapers)
JEL-codes: C15 C51 C52 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations:
Published in Journal of Econometrics, 1, January, 2024, 238(1). ISSN: 0304-4076
Downloads: (external link)
http://eprints.lse.ac.uk/119379/ Open access version. (application/pdf)
Related works:
Journal Article: Simultaneously Incomplete and Incoherent (SII) Dynamic LDV Models: With an Application to Financing Constraints and Firms’ Decision to Innovate (2024) ![Downloads](https://speed.lescigales.org/xypor/index.php?q=aHR0cHM6Ly9FY29uUGFwZXJzLnJlcGVjLm9yZy9kb3dubG9hZHNfZWNvbnBhcGVycy5naWY%3D)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119379
Access Statistics for this paper
More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().