Semiparametric estimation of the link function in binary-choice single-index models

Abstract

We propose a new, easy to implement, semiparametric estimator for binary-choice single-index models which uses parametric information in the form of a known link (probability) function and nonparametrically corrects it. Asymptotic properties are derived and the finite sample performance of the proposed estimator is compared to those of the parametric probit and semiparametric single-index model estimators of Ichimura (J Econ 58:71–120, 1993) and Klein and Spady (Econometrica 61:387–421, 1993). Results indicate that if the parametric start is correct, the proposed estimator achieves significant bias reduction and efficiency gains compared to Ichimura (1993) and Klein and Spady (1993). Interestingly, the proposed estimator still achieves significant bias reduction and efficiency gains even if the parametric start is not correct.