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A binary variable takes on only two values, zero and one. When the outcome variable is binary, the model is called the binary response model or the binary choice model. We can use the OLS method to estimate it, and such a model is called the linear probability model. The linear probability model is simple to estimate, but it has drawbacks. The fitted probability can be less than zero or greater than one, and the partial effect of the explanatory variable is a constant. To overcome these disadvantages, we can use the nonlinear models, the logit and the probit models. #logit #probit #predict *************************** *27. Binary Choice Models * *************************** capture log close log using binary.log, text replace set showbaselevels on webuse nlsw88.dta, clear describe summarize *Linear Probability Model (LPM) regress union c.wage i.married i.south i.c_city i.industry testparm i.industry predict unionhat if e(sample), xb summarize union unionhat if e(sample) *Logit Model logit union c.wage i.married i.south i.c_city i.industry predict unionhatlogit if e(sample), pr summarize union unionhatlogit if e(sample) *Probit Model probit union c.wage i.married i.south i.c_city i.industry predict unionhatprobit if e(sample), pr summarize union unionhatprobit if e(sample) summarize union* if e(sample) log close 【Some Free Courses on My YouTube Channel】 Economics in Real Life: • Economics in Real Life Solutions to Introductory Econometrics A Modern Approach 7th Edition: • Solutions to Introductory Econometrics A M... Solutions to Microeconomics Theory and Applications with Calculus 5th Edition: • Solutions to Microeconomics Theory and App... Introductory Stata: • Introductory Stata (2022) Introductory Microeconomics: • Introductory Microeconomics (2022) Five Minute Econometrics: • Five Minute Econometrics (Econometrics Tut... Five Minute Stata: • Stata Tutorials 【國語Mandarin】現實生活中的經濟學: • 【Mandarin國語】現實生活中的經濟學 【粵語Cantonese】現實生活中的經濟學: • 【Cantonese粵語】現實生活中的經濟學 【粵語Cantonese】微觀經濟學基礎: • 粵語Cantonese微觀經濟學基礎2022 【國語Mandarin】五分鐘計量經濟學: • 【Mandarin國語】五分鐘計量經濟學(計量經濟學輔導) 【粵語Cantonese】五分鐘計量經濟學: • 【Cantonese粵語】五分鐘計量經濟學(計量經濟學輔導) On the Road: • On the Road 【Become a Supporter of the channel ($2.99) to get PDF transcripts for】 1. Solutions to Microeconomics Theory and Applications with Calculus 5th Edition, 2. Solutions to Introductory Econometrics A Modern Approach 7th Edition, 3. Introductory Stata (2022), and 4. Introductory Microeconomics (2022). Please follow the links in the members-only post in the community to download them. / @bobwenecon