Use the data in LOANAPP.RAW for this exercise; see also Computer Exercise C8 in Chapter 7. (i)… 1 answer below »
Use the data in LOANAPP.RAW for this exercise; see also Computer Exercise C8 in Chapter 7.
(i) Estimate a probit model of approve on white. Find the estimated probability of loan approval for both whites and nonwhites. How do these compare with the linear probability estimates?
(ii) Now, add the variables hrat, obrat, loanprc, unem, male, married, dep, sch, cosign, chist, pubrec, mortlat1, mortlat2, and vr to the probit model. Is there statistically significant evidence of discrimination against nonwhites?
(iii) Estimate the model from part (ii) by logit. Compare the coefficient on white to the probit estimate.
(iv) Use equation (17.17) to estimate the sizes of the discrimination effects for probit and logit.
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